Corporate Values

“…despite lip-service to the contrary, the long-term vision that values require is not rewarded. US corporate governance norms are based on the shareholder value model, which enshrines maximizing shareholder profits as a company’s raison d’être.”

“The problem with corporate “values””, Vox, Anna Held, September 21, 2021.

The Vox article, “The problem with corporate “values” ”, spells out very succinctly why the corporate values may not be what it appears to be. The media got right to the heart of what I feel is the issue: the shareholder dogma promulgated since the ’70s will not allow true purpose, missions and values (other than to make money solely for the shareholders, which is another way of saying make more money for the already wealthy) that serves to improve society to take hold.

It is not about short term versus long term. It’s about who gets the money and following that the power.

Here’s a couple of choice quotes from the article that clearly elucidates the real issue. The first quote is a general statement about the type of capitalism we have today.

“This model in its most typical application operates at the expense of a labor and economic ecosystem. Looking at the workforce, we’ve reached a tipping point in this power imbalance triggering both individual and collective action. Employees are resigning at unprecedented rates, with many employees opting out of the system entirely.

Without a shift to a more democratic model that emphasizes the health of all stakeholders, we’ll all continue to suffer the calamitous effects of profit maximization. ”

“The problem with corporate “values””, Vox, Anna Held, September 21, 2021.

And here’s the second one that outlines the Friedman doctrine and its impact:

“This rampant focus on short-term financial gains over long-term sustainability and growth is born out of the shareholder model, which has been the norm of business governance in the United States since the 1970s. Introduced as the Friedman doctrine, it explicitly denounces corporate social responsibility and limits the goals of a company to maximizing shareholder profits. The longstanding defense of the shareholder model is it is the most likely to ensure the survival of the business, which is good for everyone. In practice, though, limiting the end goal of companies to making money for shareholders has shifted gains from worker productivity to shareholders, stagnating wages and stifling economic growth. In 2019, the average CEO made 320 times as much money as the average worker.

As companies create and codify income inequality, they also create and codify unproductive and unsafe communities, says Julie Battilana, a professor of organizational behavior at Harvard’s Business and Kennedy Schools and the author of Power, for All. “Everyone is losing, including the people at the top. They get a large part of the pie, but that pie is getting smaller.” ”

“The problem with corporate “values””, Vox, Anna Held, September 21, 2021.

There are some degrees of skepticism about corporation’s declaration of their values. As the article pointed out, banging on the drum about their values is a great marketing tool to show customers and potential hiring candidates that the company is trying to do good rather than embrace the greed of the ’80s. Unfortunately, the use of values as a marketing tool tends to breed insincerity.

When companies beat the drum about how great they are or how they are trying to save the world, take it with a grain of salt. We’ll have to dig deeper beyond the surface level declarations to see what the corporations’ true values are. If shareholder value is still a part of their statement, then it is best to regard shareholder values as the true value system.

Vox, though, does offer up what may be a solution and the media looks to Europe, and more specifically Germany, for a new way of creating capitalism or a new way of setting up companies that benefit society rather than just shareholders alone. It’s an idea worth investigating.