What Today’s CEOs Could Learn From Cornelius Vanderbilt
T.J. Stiles: Well, first of all I want to be very clear that I'm not an authority on the current financial scene and I don't think that I could reasonably cast a blanket, either condemnation or defense for today's corporate managers. I think there are plenty of companies that are honestly and effectively run. And the American economy certainly continues to be a great magnet for investment and for faith around the world. So when we criticize corporate managers I think in all fairness, you know, for myself I see myself as no ideology. I see myself as a historian first and foremost when it comes to analyzing the evidence. Being honest, looking at all sides of an issue so when I bring that to the modern world I have to say we can't go over the top in any direction.
One of my concerns as someone who has studied the 19th Century and is not looking at today's world, is the distance that exists between for example Cornelius Vanderbilt's attitude toward his responsibilities as the chief executive of a corporation, towards his shareholders. And what - and again what appears to me, not as a student but as a informed observer, the attitude of some CEOs in today's large corporations, specifically when it comes for example to compensation. Vanderbilt took no salary and no bonuses as a chief executive of his corporations. The only remonetization he got was in dividends. Now you can't duplicate that model today because today's investors expect the share price to grow.
They expect the actual assets to increase in value and that's what investors look for. Dividends are a secondary issue at best. In Vanderbilt's day and I look in my book the theories of why this is so at the time, dividends are what investors wanted, so in order to have a healthy company, to have a highly valued company, you had to return a large share of your profits every year in large dividends to your investors. Vanderbilt was a major, often majority shareholder in his companies and so his only income came from dividends which meant that he had to make his companies profitable year end and year out. And that he only got the remuneration that came from running a healthy, productive company that was profitable.
In today's world the, you know, there's many different companies with many different compensation structures and yet we often see that - a very different attitude. For example, because growth and sort of vaguer ideas about what represents - what contributes to the value of a share potential, you know, market share, growth and the potential for growth. A lot of things that don't have to do with actually having a healthy underlying financial outlook for the company, a CEO can be rewarded by creating the perception that a company is healthy and growing and promises great things in the future. And actually could potentially running it into the ground, and yet gets rewarded because he's creating... he or she is creating this perception.
In Vanderbilt's day... of course Vanderbilt as a major shareholder would benefit by perceptions as well but again most of his income - most of his wealth came from steady return on the profits in his company—a share of the profits in his company. Whereas in today's world that's necessarily the case. Another troubling factor which our course creates a potential for a CEO not doing right by a shareholders in the end, another potential problem is the fact that in the modern world management is removed from ownership. And CEOs today often have the ability to basically pick their own boards. The oversight of what the CEO and the way the other executives are doing is often very limited.
Often shareholders have very little say over who is managing their company and sometimes this leads to, this is fine. You know, you have a professional manager who's conscientious and does great things with the company. We can't make blanket statements and yet the removal of management from ownership creates a potential for self-dealing, a conflict of interest. And throughout history we repeated see this so this is troubling to me in way that, for example the shear size of executive compensation is not as troubling. Of course, I love the ideal of having a very equal society but in a corporate capitalist economy what troubles me most is when there's a conflict of interest and the people who are running a company have no oversight. And there's no one looking over their shoulder, there's no one there an- in practical terms, they're answerable to.
And when you have that situation then you have somebody who's potentially taking money that rightfully belongs to the shareholders. And the terminology that they use in Vanderbilt's time is very interesting. They would refer to the shareholders as the owners. They didn't talk about, you know, the shareholders, they talked about owners and they referred to the company as your property in their annual statements for example. And this is very important, this is having that attitude as a CEO keeps you honest. And being able to run the management out of town if necessary, you know, having that threat is important, I think to keep something healthy. We have that in politics and we have enough trouble in politics as it is.
And we need that in corporate management as well. So I don't want to make a blanket condemnation, it's just that of today's executives. When we do have problems and we do have controversies I often think it's connected to the fact that a lot management of large corporations are no longer answerable to people that actually own the company. And when that happens I think that's when trouble often steps in.
Recorded May 25, 2010
Interviewed by Andrew Dermont
Problems in corporate America are often connected to the fact that management is no longer answerable to the people who actually own their companies.
A recent study gives new meaning to the saying "fake it 'til you make it."
- The study involves four experiments that measured individuals' socioeconomic status, overconfidence and actual performance.
- Results consistently showed that high-class people tend to overestimate their abilities.
- However, this overconfidence was misinterpreted as genuine competence in one study, suggesting overestimating your abilities can have social advantages.
Is this proof of a dramatic shift?
- Map details dramatic shift from CNN to Fox News over 10-year period
- Does it show the triumph of "fake news" — or, rather, its defeat?
- A closer look at the map's legend allows for more complex analyses
Dramatic and misleading
Image: Reddit / SICResearch
The situation today: CNN pushed back to the edges of the country.
Over the course of no more than a decade, America has radically switched favorites when it comes to cable news networks. As this sequence of maps showing TMAs (Television Market Areas) suggests, CNN is out, Fox News is in.
The maps are certainly dramatic, but also a bit misleading. They nevertheless provide some insight into the state of journalism and the public's attitudes toward the press in the US.
Let's zoom in:
- It's 2008, on the eve of the Obama Era. CNN (blue) dominates the cable news landscape across America. Fox News (red) is an upstart (°1996) with a few regional bastions in the South.
- By 2010, Fox News has broken out of its southern heartland, colonizing markets in the Midwest and the Northwest — and even northern Maine and southern Alaska.
- Two years later, Fox News has lost those two outliers, but has filled up in the middle: it now boasts two large, contiguous blocks in the southeast and northwest, almost touching.
- In 2014, Fox News seems past its prime. The northwestern block has shrunk, the southeastern one has fragmented.
- Energised by Trump's 2016 presidential campaign, Fox News is back with a vengeance. Not only have Maine and Alaska gone from entirely blue to entirely red, so has most of the rest of the U.S. Fox News has plugged the Nebraska Gap: it's no longer possible to walk from coast to coast across CNN territory.
- By 2018, the fortunes from a decade earlier have almost reversed. Fox News rules the roost. CNN clings on to the Pacific Coast, New Mexico, Minnesota and parts of the Northeast — plus a smattering of metropolitan areas in the South and Midwest.
Image source: Reddit / SICResearch
This sequence of maps, showing America turning from blue to red, elicited strong reactions on the Reddit forum where it was published last week. For some, the takeover by Fox News illustrates the demise of all that's good and fair about news journalism. Among the comments?
- "The end is near."
- "The idiocracy grows."
- "(It's) like a spreading disease."
- "One of the more frightening maps I've seen."
- "LOL that's what happens when you're fake news!"
- "CNN went down the toilet on quality."
- "A Minecraft YouTuber could beat CNN's numbers."
- "CNN has become more like a high-school production of a news show."
Not a few find fault with both channels, even if not always to the same degree:
- "That anybody considers either of those networks good news sources is troubling."
- "Both leave you understanding less rather than more."
- "This is what happens when you spout bullsh-- for two years straight. People find an alternative — even if it's just different bullsh--."
- "CNN is sh-- but it's nowhere close to the outright bullsh-- and baseless propaganda Fox News spews."
"Old people learning to Google"
Image: Google Trends
CNN vs. Fox News search terms (200!-2018)
But what do the maps actually show? Created by SICResearch, they do show a huge evolution, but not of both cable news networks' audience size (i.e. Nielsen ratings). The dramatic shift is one in Google search trends. In other words, it shows how often people type in "CNN" or "Fox News" when surfing the web. And that does not necessarily reflect the relative popularity of both networks. As some commenters suggest:
- "I can't remember the last time that I've searched for a news channel on Google. Is it really that difficult for people to type 'cnn.com'?"
- "More than anything else, these maps show smart phone proliferation (among older people) more than anything else."
- "This is a map of how old people and rural areas have learned to use Google in the last decade."
- "This is basically a map of people who don't understand how the internet works, and it's no surprise that it leans conservative."
A visual image as strong as this map sequence looks designed to elicit a vehement response — and its lack of context offers viewers little new information to challenge their preconceptions. Like the news itself, cartography pretends to be objective, but always has an agenda of its own, even if just by the selection of its topics.
The trick is not to despair of maps (or news) but to get a good sense of the parameters that are in play. And, as is often the case (with both maps and news), what's left out is at least as significant as what's actually shown.
One important point: while Fox News is the sole major purveyor of news and opinion with a conservative/right-wing slant, CNN has more competition in the center/left part of the spectrum, notably from MSNBC.
Another: the average age of cable news viewers — whether they watch CNN or Fox News — is in the mid-60s. As a result of a shift in generational habits, TV viewing is down across the board. Younger people are more comfortable with a "cafeteria" approach to their news menu, selecting alternative and online sources for their information.
It should also be noted, however, that Fox News, according to Harvard's Nieman Lab, dominates Facebook when it comes to engagement among news outlets.
CNN, Fox and MSNBC
Image: Google Trends
CNN vs. Fox (without the 'News'; may include searches for actual foxes). See MSNBC (in yellow) for comparison
For the record, here are the Nielsen ratings for average daily viewer total for the three main cable news networks, for 2018 (compared to 2017):
- Fox News: 1,425,000 (-5%)
- MSNBC: 994,000 (+12%)
- CNN: 706,000 (-9%)
And according to this recent overview, the top 50 of the most popular websites in the U.S. includes cnn.com in 28th place, and foxnews.com in... 27th place.The top 5, in descending order, consists of google.com, youtube.com, facebook.com, amazon.com and yahoo.com — the latter being the highest-placed website in the News and Media category.
If you thought your mother was pushy in her pursuit of grandchildren, wait until you learn about bonobo mothers.
- Mother bonobos have been observed to help their sons find and copulate with mates.
- The mothers accomplish this by leading sons to mates, interfering with other males trying to copulate with females, and helping sons rise in the social hierarchy of the group.
- Why do mother bonobos do this? The "grandmother hypothesis" might hold part of the answer.
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