What Today’s CEOs Could Learn From Cornelius Vanderbilt

Question: What can today’s CEOs learn from Vanderbilt’s management practices?

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.

Videos
  • Climate change is no longer a financial problem, just a political one.
  • Mitigating climate change by decarbonizing our economy would add trillions of dollars in new investments.
  • Public attitudes toward climate change have shifted steadily in favor of action. Now it's up to elected leaders.


Yale scientists restore brain function to 32 clinically dead pigs

Researchers hope the technology will further our understanding of the brain, but lawmakers may not be ready for the ethical challenges.

Still from John Stephenson's 1999 rendition of Animal Farm.
Surprising Science
  • Researchers at the Yale School of Medicine successfully restored some functions to pig brains that had been dead for hours.
  • They hope the technology will advance our understanding of the brain, potentially developing new treatments for debilitating diseases and disorders.
  • The research raises many ethical questions and puts to the test our current understanding of death.

The image of an undead brain coming back to live again is the stuff of science fiction. Not just any science fiction, specifically B-grade sci fi. What instantly springs to mind is the black-and-white horrors of films like Fiend Without a Face. Bad acting. Plastic monstrosities. Visible strings. And a spinal cord that, for some reason, is also a tentacle?

But like any good science fiction, it's only a matter of time before some manner of it seeps into our reality. This week's Nature published the findings of researchers who managed to restore function to pigs' brains that were clinically dead. At least, what we once thought of as dead.

What's dead may never die, it seems

The researchers did not hail from House Greyjoy — "What is dead may never die" — but came largely from the Yale School of Medicine. They connected 32 pig brains to a system called BrainEx. BrainEx is an artificial perfusion system — that is, a system that takes over the functions normally regulated by the organ. The pigs had been killed four hours earlier at a U.S. Department of Agriculture slaughterhouse; their brains completely removed from the skulls.

BrainEx pumped an experiment solution into the brain that essentially mimic blood flow. It brought oxygen and nutrients to the tissues, giving brain cells the resources to begin many normal functions. The cells began consuming and metabolizing sugars. The brains' immune systems kicked in. Neuron samples could carry an electrical signal. Some brain cells even responded to drugs.

The researchers have managed to keep some brains alive for up to 36 hours, and currently do not know if BrainEx can have sustained the brains longer. "It is conceivable we are just preventing the inevitable, and the brain won't be able to recover," said Nenad Sestan, Yale neuroscientist and the lead researcher.

As a control, other brains received either a fake solution or no solution at all. None revived brain activity and deteriorated as normal.

The researchers hope the technology can enhance our ability to study the brain and its cellular functions. One of the main avenues of such studies would be brain disorders and diseases. This could point the way to developing new of treatments for the likes of brain injuries, Alzheimer's, Huntington's, and neurodegenerative conditions.

"This is an extraordinary and very promising breakthrough for neuroscience. It immediately offers a much better model for studying the human brain, which is extraordinarily important, given the vast amount of human suffering from diseases of the mind [and] brain," Nita Farahany, the bioethicists at the Duke University School of Law who wrote the study's commentary, told National Geographic.

An ethical gray matter

Before anyone gets an Island of Dr. Moreau vibe, it's worth noting that the brains did not approach neural activity anywhere near consciousness.

The BrainEx solution contained chemicals that prevented neurons from firing. To be extra cautious, the researchers also monitored the brains for any such activity and were prepared to administer an anesthetic should they have seen signs of consciousness.

Even so, the research signals a massive debate to come regarding medical ethics and our definition of death.

Most countries define death, clinically speaking, as the irreversible loss of brain or circulatory function. This definition was already at odds with some folk- and value-centric understandings, but where do we go if it becomes possible to reverse clinical death with artificial perfusion?

"This is wild," Jonathan Moreno, a bioethicist at the University of Pennsylvania, told the New York Times. "If ever there was an issue that merited big public deliberation on the ethics of science and medicine, this is one."

One possible consequence involves organ donations. Some European countries require emergency responders to use a process that preserves organs when they cannot resuscitate a person. They continue to pump blood throughout the body, but use a "thoracic aortic occlusion balloon" to prevent that blood from reaching the brain.

The system is already controversial because it raises concerns about what caused the patient's death. But what happens when brain death becomes readily reversible? Stuart Younger, a bioethicist at Case Western Reserve University, told Nature that if BrainEx were to become widely available, it could shrink the pool of eligible donors.

"There's a potential conflict here between the interests of potential donors — who might not even be donors — and people who are waiting for organs," he said.

It will be a while before such experiments go anywhere near human subjects. A more immediate ethical question relates to how such experiments harm animal subjects.

Ethical review boards evaluate research protocols and can reject any that causes undue pain, suffering, or distress. Since dead animals feel no pain, suffer no trauma, they are typically approved as subjects. But how do such boards make a judgement regarding the suffering of a "cellularly active" brain? The distress of a partially alive brain?

The dilemma is unprecedented.

Setting new boundaries

Another science fiction story that comes to mind when discussing this story is, of course, Frankenstein. As Farahany told National Geographic: "It is definitely has [sic] a good science-fiction element to it, and it is restoring cellular function where we previously thought impossible. But to have Frankenstein, you need some degree of consciousness, some 'there' there. [The researchers] did not recover any form of consciousness in this study, and it is still unclear if we ever could. But we are one step closer to that possibility."

She's right. The researchers undertook their research for the betterment of humanity, and we may one day reap some unimaginable medical benefits from it. The ethical questions, however, remain as unsettling as the stories they remind us of.

Elizabeth Warren's plan to forgive student loan debt could lead to an economic boom

A plan to forgive almost a trillion dollars in debt would solve the student loan debt crisis, but can it work?

Photo credit: Drew Angerer / Getty Images
Politics & Current Affairs
  • Sen. Elizabeth Warren has just proposed a bold education reform plan that would forgive billions in student debt.
  • The plan would forgive the debt held by more than 30 million Americans.
  • The debt forgiveness program is one part of a larger program to make higher education more accessible.
Keep reading Show less