June 15, 2009
I am just back from Boston where Corporation 2020—the ambitious effort to redefine corporate purpose—completed its second Summit on the Future of the Corporation.
It is undeniable that the appetite for asking fundamental questions about corporate forms and corporate purpose has grown considerably in the eighteen months since the first Summit. Economic crises have a way of taking ideas from the margins to the mainstream.
The dialogue in Boston was a festival for people looking to take on short-termism, mandatory disclosure of non-financial matters, and fundamental governance reforms. When will some of the changes take place? Depending on the particular issue, the answer seems to be now, over the next few years, and maybe never.
Some changes are happening very fast. Indeed, because of concurring events, this Summit at times had a surreal quality. While a diverse mix of business, academics, economists, and lawyers debated ways to reshape corporate objectives in Boston, Washington, D.C. was taking action. As Judy Samuelson of the Aspen Institute was leading an excellent discussion about new policy frameworks for business, my blackberry was buzzing with news alerts (I plead guilty to the modern disease of digital attention deficit disorder) detailing the White House’s naming of a “czar” to oversee the pay of executives receiving federal bailout funds, and the <a href="http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db20090610_656281.htm">U.S. Treasury Department’s endorsement of “say on pay”</a>.
So while some reforms are happening fast, some steps—which are likely to come to pass—will take more time.
Take mandated disclosure and reporting on social and environmental questions. Unsurprisingly for this gathering, there was strong sentiment to see this happen. Susan MacCormac of Morrison & Foerster, a thoughtful advocate for new corporate forms that enable greater consideration of social and environmental factors, lent a note of caution about when it might come to be in the United States. She predicted that, even assuming a clear consensus to require disclosure, it would be four to five years before the U.S. Securities and Exchange Commission would see such provisions came into effect.
The most important changes, however, may be the ones that cannot be created through regulatory action: a change in business culture. I posed the question of whether the Summit’s focus on rules was really key to enabling responsible business. One cannot mandate low-carbon innovations or ethical decision making. Indeed, there has been mandatory disclosure in various pockets (UK investment funds, the largest publicly-listed French businesses) and this has not materially changed matters there.
The kinds of culture changes that are needed to make good laws work as intended are things that get build day by day—and can be undermined in a heartbeat. And while there is a compelling case for regulatory reforms that make it easier for companies to integrate long-term thinking into their strategies and for financial markets to pay greater heed to companies that look to the long-term, none of this will work well unless companies create cultures that discourage shortcuts.
The future of the corporation is shaped every day, by all of us. Despite all the attention to actions in Washington, D.C.—and within the G20—that may be where the real action is.
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