Whom should the corporation serve?
Business Daily
BBC
4.4 • 816 Ratings
🗓️ 17 September 2019
⏱️ 18 minutes
🧾️ Download transcript
Summary
Should shareholders come first? Or should companies also serve their employees, customers, and society in general?
Ed Butler explores the growing backlash against "shareholder primacy" - the idea espoused in the 1970s by economist Milton Friedman that businesses should only care about maximising the bottom line for the benefit of their investors, and that other stakeholders' interests should not be their prerogative.
He speaks to Lenore Palladino, economics professor at the University of Massachusetts Amherst, who has a list of changes she wants to see in the way that American companies are governed, plus Ken Bertsch of the Council of Institutional Investors, who says that the real problem is not the role of investors like the ones he represents, but too much focus on short-termism.
Meanwhile Chris Turner thinks he has the solution - he works for the non-profit organisation B Lab, which provides an objective assessment to hundreds of corporations of whether they are having a positive impact on society.
(Picture: An American flag is displayed on a trading screen at the New York Stock Exchange; Credit: Bryan R. Smith/AFP/Getty Images)
Transcript
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| 0:00.0 | Hello, I'm Ed Butler and welcome to Business Daily from the BBC. |
| 0:05.8 | Coming up, has the US lost its way in how it understands the modern corporation? |
| 0:12.3 | You can't have a successful corporation without employees working there and without customers. |
| 0:17.9 | This idea that shareholders are the only ones who invest in creating corporate |
| 0:23.0 | value, it's a real problem. |
| 0:25.7 | Yes, is this old view that firms should simply deliver value for shareholders too narrow? Should |
| 0:31.1 | we rewrite the rules for companies? |
| 0:33.9 | I think that markets and companies have been too focused on the short term. |
| 0:38.2 | There is some very serious thinking that's better than it used to be. |
| 0:41.4 | But I think we've made progress and I think it's a mistake to throw out the baby with the bathwater. |
| 0:45.6 | What should we do defining the modern company business daily from the BBC? |
| 0:53.4 | Last month, the heads of some of America's biggest corporations, Apple, J.P. Morgan, Walmart, plus dozens of others, made a joint declaration. |
| 1:02.6 | Their companies existed, they said, for the benefit of all stakeholders, customers, employees, suppliers, communities, as well as their shareholders. Now, some saw that as |
| 1:12.8 | quite something, a signal change, a sign that capitalism's core values are now coming under a |
| 1:18.8 | challenge in the United States as never before. We'll have more on that generally in a second, |
| 1:24.1 | but first, let's have some context. The US company, its very purpose, many argue, |
| 1:29.2 | has been driven by a single idea for many years. It's called shareholder primacy. It's a concept |
| 1:35.7 | championed, especially back in the 1970s, by this man, Milton Friedman. The world runs on individuals |
| 1:43.1 | pursuing their separate interests. |
| 1:45.0 | The great achievements of civilization have not come from government bureaus. |
| 1:50.0 | Einstein didn't construct his theory under order from a bureaucrat. |
| 1:54.0 | Henry Ford didn't revolutionize the automobile industry that way. |
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