Changing Corporate Culture

Yesterday’s "Outlook" section of the Washington Post had an article that argued effectively, "[c]ontemporary business culture has distorted the spirit of American capitalism by rewarding mediocrity and even failure." The article is a must read although it was short on specifics as to how we can change that business culture.

"They’ll find a way around it," was the cynical reply of an economist friend to my suggestion that we find legal remedies to shape the culture. "If you restrict their pay, they will take stock options or devise some other mechanism to make more money." He correctly pointed out that shareholders have grown complicit in this corporate culture but it is difficult to see how, acting on their, any but the most organized, economically sophisticated and legally trained shareholders could mount an effective attack on a business class that thinks their companies exist to line the pockets of their CEOs.

Advertisement

I do believe that there are legal ways to shape the culture. As mentioned last week, we can change the tax code so that any compensation about 500k is not tax deductible as a business expense" companies can pay more than that, but it will come right out of the profit margin. Additionally, a law could require that the very first page of all reports to shareholders contain information about executive pay as a percentage of company profits, in comparison to average wages for all employees, and in relation to company performance. Efforts to hide remuneration through complicated stock options could be made a crime. Enforcement in the form of regular audits by government officials would certainly keep everyone on their toes.

Cultures do not change quickly, and the Augustinian in me suspects that a healthy moral culture declines faster than it can be re-created. But, the effort must be made and there is electoral gold in embracing populist measures that are also sound policies. America’s zillionaires do not need to be guaranteed more zillions for the economy to prosper. In fact, the economy will only prosper when the average American feels confident that the system is not entirely rigged against his interests. Having laws that begin to build a culture that values workers as much as capital, long-term viability as much as short-term economic gain, and the intrinsic worth of a business enterprise as much as its stock value fifteen minutes ago, these are the ways that we get the economy going again.

 

Comments are automatically closed two weeks after an article's initial publication. See our comments policy for more.
8 years 9 months ago
Will we impose these restrictions on athletes' salaries as well? Their compensation has a huge impact on advertising rates, the cost of stadia, which taxpayers are often forced to pay, and whether or not parents can even afford to take children to games.
8 years 9 months ago
Athletes' salaries are an effect, rather than a cause of advertising rates. The union does a good job in making sure the wealth is shared. If labor were in a stronger bargaining position, or even had an ownership share (with ever increasing control) you would not see the culture of CEO worship you have now. Stadium costs are also due to supply and demand. Stadiums can only hold so many people, so the price goes up. Stadiums who are owned by the municipality should also insist on some share of team ownership (as should the players). Back to the original point, if the players owned the teams (rather than the usual rich corporate CEOs), you would have more equity in the distribution of income, with retirees not having to sell their championship rings to eat or to pay for medical care from having had too many concussions. Indeed, you may see a safer game.
8 years 9 months ago
Of all Western countries, the US has been probably the least willing to regulate its economy. While there are those who point to this as the reason for the current economic woes that you have brought upon the rest of us, there is another side that should not be missed. Churches and NGOs in other countries have a well-deserved reputation for critiquing their corporate and governmental policies relating to the economy. This critical stance vis. the economy is largely lacking in the US, or is marginalized from public discourse. As the American public is currently looking for new ideas, American churches and church-based NGOs would be well served by looking to the work of churches in other countries. Americans want to think of themselves as innovators, as being on the leading edge with new ideas. Here is a perfect example where other countries have far more mature economic experience that you could learn from, particularly in the areas of sustainability, cultural preservation, and protection of the marginalized.
8 years 9 months ago
I believe another issue in the current corporate climate is the emergence of the ''day trader:'' the casual investor who makes short term stock purchases on the concept of ''buy low, sell high'' with a quick turn around, with an interest in short term profit and no interest in long term investment in individual companies. This is combined with laws and corporate policies that require heads of corporations to make shareholder return their primary duty, and the weakening of laws protecting workers. This combination has contributed a culture in which executives are encouraged to take any measure to ensure short term profitability and shareholder return at any cost, which is not a sustainabable strategy. I seldom hear this addressed. The overall culture must be transformed to renew a mindset of long term investment, not short term stock purchases, and the understanding that corporations do have a larger role to play in the welfare and stability of the larger society that is not limited to immediate shareholder return. The Church can have a positive role this. Is she ready for it? Are her leaders willing to take up the challenge?
8 years 9 months ago
As much as I would like to see some sanity returned to excessive CEO salaries, I don't think it can or should be legislated except as a condition of accepting taxpayer money in a bailout/rescue/stimulus/insurance cover/whatever. Businesses can organize themselves and set their compensation scales however they want to advance their financial interests, and if they want to pay unconscionably huge salaries even for inept leadership, that's their prerogative and it's the responsibility of boards of directors and shareholders to rein it in when necessary. That said, a little dose of public shame for CEOs who make salaries vastly in excess of those of their workers - especially when their performance is poor - wouldn't be a bad thing.
8 years 9 months ago
Cultures do change quick, often being forced to. Time to force change back to a regulated economy, that is sustainable and not just another round of Bush and McCain playing craps in their world of GOP Casino Economics. Most Americans recognize they have been able to participate in Regime Change, and they see the results of the unethical policies of party that got dumped. We can no longer accept the Bush brand of deregulation that uses intentional non-enforcement to bypass laws and reward cronyism. We can not continue to believe the mularky that industry can regulate itself. The last eight years have definitively proved otherwise. Forget the notion that shareholders can influence corporate board behavior - that fiction is a joke, other than suing for overt fraud and theft. Corporate boards are fixed in favor of rewarding executives (and themselves) regardless of success or failure. Americans are just gonna have to roll up their sleeves and enforce laws that reward hard work, regulations that defeat the ponzi schemers and speculators, and move beyond those partisans who seem apparently proud of their part in causing the current economic collapse. We couldn't change quick enough to avoid this economic collapse, but have faith in the American people to have sense enough to seek strong change - to not go down this road again anytime soon.
8 years 9 months ago
Well perhaps we should limit athletes' compensation, at least in instances when teams are being subsidized for stadiums. Or perhaps we should not have taxpayers subsidize stadiums at the same time municipal governments are threatening to lay off teachers, close libraries and fire houses, eliminate senior centers, etc. If anyone deserves government help, it's probably not millionaire athletes and multimillionaire owners.

Advertisement

Don't miss the best from America

Sign up for our Newsletter to get the Jesuit perspective on news, faith and culture.

The latest from america

Images: CNS/Composite: America
On Nov. 11, the Catholic Church lost a moral titan in the long struggle for racial equality and justice in the United States.
Shannen Dee WilliamsNovember 22, 2017
Senior Gen. Min Aung Hlaing, Myanmar military commander-in-chief, speaks during the Union Peace Conference Aug. 31 in Naypyitaw (CNS photo/Hein Htet, EPA).
Gen. Min Aung Hlaing wields great political power in the country.
Jacob Tremblay and Julia Roberts in “Wonder” (CNS photo/Lionsgate). 
‘Wonder’ is a tween melodrama on a mission of mercy.
Simcha FisherNovember 22, 2017
The change was in “no way” a response to the C.C.H.D.’s persistent online critics, an archdiocesan official says.
Kevin ClarkeNovember 22, 2017