In Winners Take All, writer Anand Giridharadas sharply challenged business leaders who proclaim that they’re doing good for the world in venues like Aspen while their companies contribute to inequality and climate change.
Now Judy Samuelson, founder and executive director of the Aspen Institute’s Business and Society program, presents another view, with her book due out on January 12, The Six New Rules of Business. Samuelson, who has convened academics and executives on these issues for decades, believes that big businesses can contribute to the world if they have the right practices and the right leadership.
“Business is not by any means the whole answer, but we can’t ignore it either,” she says in her response to Giridharadas’s critique. “Business is the most influential institution of our day,” Samuelson writes. “We need business’s talent, investment, problem-solving skills, and global reach to make progress on intractable problems from climate change to inequality to equipping workers for a new age of work.”
Samuelson’s six new rules represent shifts that she believes are moving businesses toward creating real long-term value as opposed to short-term, extractive financial gains. They are:
- “Reputation, trust, and other intangibles drive business value”—as opposed to hard assets.
- “Businesses serve many objectives beyond shareholder value”—as opposed to just focusing on profit maximization.
- “Corporate responsibility is defined far outside the business gates”—as companies are held accountable by global actors for impacts such as climate change.
- “Employees give voice to risk and competitive advantage”—as opposed to an outdated view that workers were a cost to be minimized and employee activism a headache at best.
- “Culture is king; talent rules”—as financial capital is easy to come by and physical assets less important, diverse teamwork and talent are now drivers of success.
- “Co-create to win”—rather than competing ruthlessly and stripping the planet of resources.
The Six New Rules of Business makes a number of important points, including:
- A company’s stated purpose is arguably ancillary to what it actually does in practice. “In all companies, purpose is also revealed,” Samuelson writes. (p. 49)
- Capital markets are perceived to have more importance to businesses than they in fact do. Capital is cheap and easily available, and capital investments are less important in a service economy than when more businesses were hungry for capital to build manufacturing facilities and the like. Samuelson cites how cash-flush so many corporations are now, and deftly explains how stock-market listings like the low-drama direct approach of Spotify signal a shift that should further diminish the perceived primacy of shareholders.
- American business leaders came together in 1942 to form an organization called the Committee for Economic Development (CED) that aimed to support the creation of good-paying jobs for military when they returned at the end of World War II. The effort proved successful, and Samuelson sees it as “a template for what is required of business and industry and the professions as we work to build an economy that works for all.” (p. 128)
- Data alone don’t drive change—executives need to have direct experiences to get them to change what they believe. “The wake-up call to the CEO comes with a swift kick in the rear from an aggressive campaign, or an encounter with an employee in the cafeteria or parking lot, or a provocative question at the all-hands or from his [or her] kid at the kitchen table,” Samuelson writes. (p. 151)
- Executive compensation is structured in most companies so as to incentivize CEOs to focus disproportionately on shareholder return. Samuelson argues that change is needed, and suggests perhaps starting by looking at whether workers lower down are being paid fair wages.
To be sure…
- Samuelson puts a lot of stock in statements by the Business Roundtable (BRT), the group of big US company CEOs. Upon the issuance of the BRT’s 2019 statement committing to prioritize interests beyond shareholders, such as employees, “Game over, I thought,” Samuelson writes. “It was a new day.” (p. 59.) But the followthrough has in fact been disappointing: the BRT signatories were the same or worse at looking after their workers when the pandemic hit. It surely didn’t feel like a new day for all of the workers that BRT-member CEOs promptly laid off during the crisis.
- Samuelson’s analysis is very focused on the perspective of executives. In her accounts, any employees are largely nameless, while many top executives are named in succession. When mentioning the importance of employee voice, Samuelson doesn’t discuss in much depth unions and the impact of their dismantling. A revival of organized labor, in fact, is arguably an important ingredient for addressing economic inequality and other woes businesses purport to be concerned about.
- Samuelson introduces new people and companies at a rapid clip, many in the context of their ties to the Aspen Institute programming over the years. Her writing can be breakneck in pace—though, in the end, The Six New Rules of Business is impressively encyclopedic.
- Former Merck CEO Roy Vagelos decided in the late 1980s that the company should produce a drug to prevent and treat river blindness, despite the fact that there was no profitable market for it. He committed to produce Mectizan “free of cost for as long as needed, as much as needed, and wherever needed” in part to signal support to the Merck scientists who had discovered it. “What message would it send to our employees if we decided against manufacturing a drug that cures a disease as devastating as river blindness,” Samuelson quotes Vagelos as telling her. (p. 48)
- “The new rules influence—and are influenced by—the change agents who operate within business or challenge it from the outside. They offer a response to withering critiques of capitalism and the decline in trust in business as an institution. The endgame is to secure the remarkable capacity of business to move the needle on socially and environmentally critical goals.” (p. 11)
- “As a value of business culture, equity has an intangible quality to it—yet the absence of equity is deeply felt.” (p. 36)
- “Market civitas…requires business to lend its considerable weight to the health of the commons: to critical infrastructure, an educated labor force, and equal access for all to public goods.” (p. 38)
- “A business is nothing without a workforce that believes in the product or standing in a community that governs access to tangible assets—clean water, infrastructure, minerals.” (p. 40)
- “Business purpose begins with intentions but is revealed through the actions and rewards that shape the culture and the decisions for which the company is known—what the company becomes.” (p. 55)
- “Even the most tangible change in business requires a special kind of leader—one who can subordinate his or her ego and link his or her ambitions to something larger, to root cause analysis and systemic change.” (p. 143)
- “We need to redesign pay to catch up with the intentions of executives to serve society.” (p. 148)
- “Metrics mostly document what we already believe to be true. Facts can support the changes—but they rarely cause the change.” (p. 153)
Key quotes cited:
- “The system is perfectly designed for the result we have now—if we want a different result, we need to rethink the system.”—Adam Kahane, author of Solving Tough Problems (p. 9)
- “Profits sustain us, but they don’t define us.”—Marjorie Scardino, former Pearson CEO (p. 45)
The bottom line is that one would do well to read Giridharadas and Samuelson together. They’re an unlikely pairing—but Giridharadas’s 2018 book offers an important critique of corporate elites’ hypocrisy, enabled by rarefied Davos and Aspen air. And Samuelson, drawing on decades of analysis and examples, believes that business leaders can drive change—and that forces behind the six new rules are pushing them to do so. She presents an important alternative framing for how they should think about value creation, focused on the long-term and empowering employees. She also identifies executive pay reform as a critical component, even if shifting that is not easy.
Giridharadas and Samuelson are probably both right, to some degree or other. There’s clearly an opportunity for big business to make positive contributions, as with Merck and the river blindness drug. But too often it’s unrealized, as with the gap between the BRT’s 2019 statement and the behavior of its CEO members during the pandemic.
The handbook for this new era of business doesn’t exist. We’re all drafting our own as we go along—and now we’d like to start doing so together. You can sign up here to receive this briefing by email.