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Maximizing shareholder profits can no longer be corporations' main goal, say top U.S. CEOs
A group representing more than 100 of the biggest corporations in the U.S. has released a statement updating its definition of the purpose of American corporations.
JOHANNES EISELE / Contributor
- The new statement says corporations shouldn't only be concerned about maximizing shareholder profits.
- Instead, corporations should focus on all of its stakeholders.
- The idea that corporations need only focus on maximizing shareholder profit took hold in the 1970s and has since remained, more or less, the dominant viewpoint on Wall Street.
Since around the 1980s, most American corporations have agreed their main purpose is to maximize shareholder profits. Now, amid growing concerns about income inequality and Democratic policy proposals that call for restructuring American capitalism, some of the nation's biggest corporations are saying it's time to change the definition of corporate purpose.
The Business Roundtable, a lobbying group of American CEOs, released a statement Monday describing how the corporate world's long-held definition of purpose — often called "shareholder primacy" — "does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable."
"Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity," the statement reads. "We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all."
The Business Roundtable updates its guidelines periodically, but Monday's update is the most explicit to date in rejecting shareholder primacy. The statement — signed by 181 of 192 current members of the Business Roundtable, including CEOS from companies such as Apple, Pfizer, Mastercard, and Ford Motor Company — says members commit to:
- Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
- Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
- Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
- Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
- Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.
The statement doesn't promise any concrete changes, and it's unclear how corporations might change their practices, if at all. One governance expert said the statement actually decreases these executives' accountability.
"It limits accountability for these people to anyone, because if you have multiple stakes with whom you're accountable, you're always going to get it right on someone," Charles Elson, who directs the John L. Weinberg Center for Corporate Governance at the University of Delaware, told The Washington Post. "You can always make an argument that no matter what you've done, some stake will benefit. If your watch stops, it still gets the time right twice a day."
Still, at the very least, the statement signals a symbolic change in ethos of the American corporate elite.
"It really is quite significant," Peter Cappelli, a professor who studies labor economics at the University of Pennsylvania's Wharton School, told the Post. "It sounds like what they're describing is what was the standard view before the mid-1980s — before the shareholder value idea really started to spread."
'Maximize shareholder profits'
The idea of shareholder primacy can be traced back to the economist Milton Friedman, who wrote a New York Times Magazine article in 1970 deriding the claim that corporations ought to be socially responsible, calling it a "fundamentally subversive doctrine" in a free society, adding, "there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
In short, "social responsibilities" are for individuals; corporations need only focus on making as much money as possible without breaking the law.
"That article was very well received in Wall Street," Joseph L. Bower, a professor of business administration at Harvard University, recounted to Forbes. "They loved it. You could see the change in compensation practices. The use of the phrase 'maximize shareholder value' exploded at that time."
Bower once said the idea that corporations need only "maximize shareholder value" is "pernicious nonsense." In a 2017 article for Harvard Business Review, Bower and Lynn S. Paine suggest that Friedman's essential idea "could be damaging to the broader economy," mainly because it gives extreme consideration to shareholders over a short-term timeframe, while ignoring other stakeholders, such as employees or society at large. This results in an "accountability vacuum," they write, because in this governance approach shareholders are effectively treated as owners of the company, when in fact they're not held accountable for any company decisions.
Bower and Paine suggest that a more company-centric governance approach would benefit American corporations' many stakeholders, including but not limited to shareholders. (You can read their detailed piece here.) Meanwhile, some Democratic lawmakers have proposed policy that aims to wrest some amount of corporate power from executives and shareholders and give it to other shareholders.For example, U.S. Sen. Bernie Sanders (D–VT) wants to prohibit corporations from buying back their own stock, which drives up share prices, unless they boost employee pay and benefits. Separately, Sen. Elizabeth Warren's Accountable Capitalism Act aimed to restructure corporate decision-making, in part by mandating that corporations allow 40 percent of board members to be elected by employees, and by limiting the ways in which directors and officers sell company shares.
Andy Samberg and Cristin Milioti get stuck in an infinite wedding time loop.
- Two wedding guests discover they're trapped in an infinite time loop, waking up in Palm Springs over and over and over.
- As the reality of their situation sets in, Nyles and Sarah decide to enjoy the repetitive awakenings.
- The film is perfectly timed for a world sheltering at home during a pandemic.
In more than a dozen countries as far apart as Portugal and Russia, 'Smith' is the most popular occupational surname
- 'Smith' is not just the most common surname in many English-speaking countries
- In local translations, it's also the most common occupational surname in a large part of Europe
- Ironically, Smiths are so ubiquitous today because smiths were so special a few centuries ago
Meet the Smiths, Millers, Priests and Imams - the most popular occupational surnames across Europe.
Image: Marcin Ciura<p>Although very few people are smiths by profession these days, there are millions of Smiths by surname the world over. It's the most popular surname in Britain, Australia, New Zealand and the United States, as well as the second most popular surname in Canada and the fifth most popular one in Ireland. And they're a thriving bunch, at least in the U.S.: the 2010 Census (1) counted 2,442,977 Americans called Smith, 2.8% more than in 2000.</p><p>Curiously, 'Smith' also is one of the most popular surnames across most of Europe –translated in the various local vernaculars, of course. This map shows the most common occupational surnames in each country. By colour-coding the professions, this map shows a remarkable pro-smith consistency across Europe – as well as some curious regional exceptions.</p>
‘Smith’ popular throughout Europe<p>'Smith', in all its variations, is the most popular occupational surname throughout Europe. Not just in the UK, but also in:</p> <ul><li>Belgium (<em>Desmet</em>) and Luxembourg, (<em>Schmitt</em>);</li> <li>France (<em>Lefebvre</em>), Italy (<em>Ferrari</em>) and Portugal (<em>Ferreira</em>);</li> <li>Slovenia (<em>Kovačič</em>), Croatia (<em>Kovačevič</em>), Hungary (<em>Kovács</em>), Slovakia (<em>Kováč</em>), Poland (<em>Kowalski</em>), Lithuania (<em>Kavaliauskas</em>), Latvia (<em>Kalējs</em>) and Belarus (<em>Kavalyov</em>);</li> <li>Estonia (<em>Sepp</em>); and</li> <li>Russia (<em>Kuznetsov</em>).</li></ul>
‘Miller’ on top in many Germanic-language countries<p>'Miller' is the most popular occupational surname in many Germanic-language countries, but also in Spain and Ukraine (perhaps because the grain in both countries is mainly in the plain):</p> <ul><li>There's <em>Müller</em> (in Germany and Switzerland), <em>M</em><em>ø</em><em>ller</em> (in Denmark and Norway) and <em>Möller</em> (Sweden);</li> <li><em>Molina</em> (in Spain – the map also shows the most popular surname in Catalonia/Catalan: <em>Ferrer</em>, i.e. 'Smith'); and</li> <li><em>Melnik</em> (in Ukraine).</li></ul>
Clergy surnames rule in the Balkans<p>Catholic clergy must remain celibate, so 'Priest' as a surname is rare to non-existent throughout Europe. Except in the Balkans, where Catholicism is largely absent. Here, the Orthodox and Islamic clergies have passed on the title from father to son, eventually as a surname, to popular effect. Orthodox clergy are addressed as <em>papa</em> or <em>pope</em> (which means 'father' – so the surname rather redundantly translates to 'father's son'). Islamic teachers or imams are known by the Turkish/Persian term <em>hodzha</em>. An overview:</p> <ul><li><em>Popov</em> (in Bulgaria), <em>Popovic</em> (in both Serbia and Montenegro), <em>Popovski</em> (in Macedonia);</li> <li><em>Popa</em> (in Romania); </li> <li><em>Papadopoulos</em> (in Greece); and</li> <li><em>Hodžić</em> (in Bosnia-Herzegovina), <em>Hoxha</em> (in both Kosovo and Albania).</li></ul>
Landowners and other professions<p>Austria and the Czech Republic have different national languages but are neighbours and share a lot of history. Could that explain why they have a similar most popular occupational surname, for 'landowner'?</p> <ul><li><em>Huber</em> (in Austria) and</li> <li><em>Dvořák</em> (in the Czech Republic).</li></ul> <p>Just four professions, that wraps up all but five countries on this map. Those five each have their very own most popular occupational surname:</p> <ul><li><em>Bakker</em> (in the Netherlands): 'Baker'</li> <li><em>Kinnunen</em> (in Finland): 'Skinner'</li> <li><em>Ceban</em> (in Moldova): 'Shepherd'</li> <li><em>Avci</em> (in Turkey): 'Hunter'</li> <li><em>Murphy</em> (in Ireland): 'Sea Warrior' </li></ul>
Even more Smiths<p>Judging from the popularity of these surnames, your generic European village of a few centuries ago really couldn't do without a smithy. It was a much more essential craft even than that of the miller (or the baker, who put the miller's flour to good use) – except in the Balkans, where spiritual sustenance apparently sated a greater need. On the outskirts of <em>Anytown, Europe</em> live the shepherd and the hunter, the skinner and the pirate.<br></p><p>A bit too simplistic? Perhaps not simplistic enough. This map could have been dominated by even more Smiths. As the original poster explains, he always picked the most frequent version of an occupational surname, even if multiple variants point to a more popular alternative. </p><p>In the Netherlands, for instance, people with the surnames <em>Smit, Smits, Smid, de Smit, Smet </em>and <em>Smith</em> collectively outnumber those with the surnames <em>Bakker, Bekker, de Bakker</em> and <em>Backer</em>. So, the Netherlands could be considered another win for 'Smith' – except that the variant <em>Bakker</em> is more frequent than any other single variant.</p><p>Same story in Germany: added up, there are more people named <em>Schmidt, Schmitt, Schmitz </em>and <em>Schmid</em> than <em>Müller</em>. Ditto for Spain: <em>Herrero, Herrera </em>and <em>Ferrer</em> together outnumber <em>Molina</em>. Also in Finland, where <em>Seppä</em>, <em>Seppälä</em> and <em>Seppänen</em> together have a higher count than <em>Kinnunen</em>. </p>
Smiths in other cultures<p>'Smith' was a crucial occupation in other cultures too, judging from the familiar ring it has in these languages:<br></p><ul><li><em></em><em>Demirci</em> (Turkish)</li><li><em>Hadad</em> (Syriac, Aramaic, Arabic)</li><li><em>Nalbani</em> (Albanian)</li><li><em>McGowan</em> (Gaelic)</li><li><em>Faber</em> (Latin)<span></span></li></ul>
Other most popular surnames<p>Take note, though: 'Smith' may be the most popular surname in in the Anglosphere, this map does not mean to show that its variants in French, Russian and other languages also are the most popular surnames in the countries marked grey. They are merely the most popular <em>occupational</em> surnames.<br></p><p>As this sample of most common ones for each country shows, surnames can refer to a host of other things. Personal qualities or physical attributes, for example:</p> <ul><li>Russia: <em>Smirnov</em> ('the quiet one')</li> <li>Turkey: <em>Yilmaz</em> ('unflinching')</li> <li>Hungary: <em>Nagy</em> ('big')</li> <li>Italy: <em>Rossi/Russo</em> ('red', in northern and southern Italy, respectively)</li></ul> <p>Another option: the origin of the name-bearer (be it a place or a person):</p> <ul><li>Sweden: <em>Andersson</em> ('son of Anders')</li> <li>Slovakia: <em>Horvath</em> ('Croat')</li> <li>Kosovo: <em>Krasniqi</em> (refers to the Krasniq tribe and their mountainous home region)</li> <li>Portugal: <em>Silva</em> ('woodland')</li> <li>Latvia: <em>Bērziņš</em> ('little birch tree')</li> <li>Estonia: <em>Tamm</em> ('oak')</li></ul> <p>But sometimes, even for the most popular ones, the exact origin of the surname is lost in time:</p> <ul><li>Spain: <em>Garcia</em> (originally Basque, possibly meaning 'young', 'bear' or 'young bear')</li> <li>Finland: <em>Korhonen</em> ('hard of hearing' or 'dim-witted'; 'village elder'; 'proud'; 'upright'). </li></ul>
Smith popularity theory<p>So why exactly is Smith – and not Miller, for example – the most popular surname in many English-speaking countries? The theory propounded by historian C.M. Matthews in <em>History Today</em> (July 1967) probably also holds for the other-language variants so popular throughout Europe:<br></p><blockquote>"The reason for (the) multiplicity (of the surname 'Smith') is not so much that metal-workers were numerous as that they were important and widespread. On the skill of the smith, both rich and poor depended for the most essential things of life, the tools of husbandry and the weapons of hunting and war. Every community in the land must have one, every castle, every manor; and so distinctive was his trade that he would seldom need another name".<em></em></blockquote><p>That does not mean all people with the surname have a forefather who forged iron into weapons and farm tools. Especially in North America, 'Smith' was adopted by many people precisely because it was already common – as a secret identity or to blend in, for example by natives, slaves and immigrants.</p>
A recent analysis of a 76-million-year-old Centrosaurus apertus fibula confirmed that dinosaurs suffered from cancer, too.
- The fibula was originally discovered in 1989, though at the time scientists believed the damaged bone had been fractured.
- After reanalyzing the bone, and comparing it with fibulas from a human and another dinosaur, a team of scientists confirmed that the dinosaur suffered from the bone cancer osteosarcoma.
- The study shows how modern techniques can help scientists learn about the ancient origins of diseases.
Centrosaurus apertus fibula
Royal Ontario Museum<p>In the recent study, the team used a combination of techniques to analyze the fibula, including taking CT scans, casting the bone and studying thin slices of it under a microscope. The analysis suggested that the dinosaur likely suffered from osteosarcoma, a type of bone cancer that affects modern humans, typically young adults.</p><p>For further evidence, the team compared the damaged fibula to a healthy fibula from a dinosaur of the same species, and also to a fibula that belonged to a 19-year-old human who suffered from osteosarcoma. Both comparisons supported the osteosarcoma diagnosis.</p>
Evans et al.<p style="margin-left: 20px;">"The shin bone shows aggressive cancer at an advanced stage," Evans said in a <a href="https://www.rom.on.ca/en/about-us/newsroom/press-releases/rare-malignant-cancer-diagnosed-in-a-dinosaur" target="_blank">press release</a>. "The cancer would have had crippling effects on the individual and made it very vulnerable to the formidable tyrannosaur predators of the time."</p><p style="margin-left: 20px;">"The fact that this plant-eating dinosaur lived in a large, protective herd may have allowed it to survive longer than it normally would have with such a devastating disease."</p><p>The fossilized fibula was originally unearthed in a bonebed alongside the remains of dozens of other <em>Centrosaurus </em><em>apertus</em>, suggesting the dinosaur didn't die from cancer, but from a flood that swept it away with its herd.</p>
Dinosaur fibula; the tumor mass is depicted in yellow.
Royal Ontario Museum/McMaster University<p>The new study highlights how modern techniques can help scientists learn more about the evolutionary origins of modern diseases, like cancer. It also shows that dinosaurs suffered through some of the same terrestrial afflictions humans face today.</p><p style="margin-left: 20px;">"Dinosaurs can seem like mythical creatures, but they were living, breathing animals that suffered through horrible injuries and diseases," Evans said, "and this discovery certainly makes them more real and helps bring them to life in that respect."</p>
Join the lauded author of Range in conversation with best-selling author and poker pro Maria Konnikova!
UPDATE: Unfortunately, Malcolm Gladwell was not able to make the live stream due to scheduling issues. Fortunately, David Epstein was able to jump in at a moment's notice. We hope you enjoy this great yet unexpected episode of Big Think Live. Our thanks to David and Maria for helping us deliver a show, it is much appreciated.