The Corporation in Society
Bill George
Harvard Business School
Advanced Corporate Law Policy
Harvard Law School
Bill George: The Corporation in Society
Fundamental Questions:
- As a corporate board member, to whom are you responsible?
- Is the corporation an institution to be developed to serve society?
Or:
- A collection of assets organized to maximize returns to investors?
- If the latter, what is the appropriate time frame over which to measure returns?
- Limited liability corporations are chartered by society, as represented by government officials.
- Corporations have the ultimate obligation to serve society by creating lasting value.
- Violations of that charter result in:
- Revocation of their charter (e.g., Arthur Anderson, Nationalization in France; Google in China
- Regulations and laws limiting its freedom to operate (e.g., Dodd-Frank, Minder Law in CH)
The Corporation in Society – The Evolution of Capitalism
Society is demanding a new form of capitalism that benefits all stakeholders
From:
Entrepreneurial Capitalism
Managerial Capitalism
Financial Capitalism
To:
Shared Value Capitalism
When stakeholder interests get out of balance, capitalism is at risk of self-destruction, as in 2002 & 2008 and 201?
Capitalism Is Facing Imperative For Renewal
The Corporation in Society – Creating “Shared Value”
- The ultimate goal for global companies is to sustain success by creating value for all its stakeholders
- This includes:
- Clients, customers & beneficiaries
- Employees
- Owners and investors
- Local government & communities
- NGOs with stake in organizations
The Corporation in Society – Sustaining Growth and Performance
The Corporation in Society – Stakeholders in Society
With societal expectations for companies rising and trust declining, should companies shift from considering local governments and communities as their stakeholders to becoming:
“Stakeholders in Society”
This notion dovetails with Prof. Porter’s ideas on “Creating shared value,” i.e., companies should look at their mainstream business as contributing to societies all over the world.
The Corporation in Society – Challenges to Board Governance
Are external challenges to board governance strengthening or weakening the board’s ability to govern the corporation and provide effective oversight of management?
Examples for discussion:
- Elimination of staggered boards
- Direct nomination of directors
- Majority and cumulative voting
- Say on pay
- ISS and Glass –Lewis
See full PDF here.
