RULESCHANGE.ORG | Time out for corporations, citizens and democracy

Month: January 2015

  • GMU assisting project on ideas to change the playing field for corporations, people and democracy

    ARLINGTON, Va. – A multi-partisan spectrum of business, policy and public groups is seeking common ground on changes to the U.S. economic system affecting the regulation and governance of corporations, their impact on consumers, markets, communities and the planet.

    The “Rules Change Project” — at http://www.ruleschange.org — is seeking input from executives, public officials, scholars, researchers, policy activists, students and engaged citizens.

    “It’s time to cross lines, exit silos and listen,” says Bill Densmore, an ex-journalist and researcher who is one of the project organizers. “We want to look at how government and business can collaborate to meet the needs of all stakeholders – employees, customers, citizens, communities and the environment – not just stockholders.” The project aims to bring together silos of thought in a reflective, collaborative, national timeout for corporations, citizens and democracy. It’s designed to assess two decades of mainstream thought on corporate regulation, governance and global-resources impact.

    “Rules Change” is a pioneering national attempt to convene diverse groups working on topics like corporate personhood, money and politics, measurement, accountability and governance that will rethink the game in the public interest, organizers say.

    The project is being assisted by the School of Public Policy at George Mason University and the Media Stewards Project, with advice from the Aspen Institute’s Business & Society Program, the New Economics Coalition (NEI) and the F.B. Heron Foundation..

    “Whether they are worried about the power of government, the power of corporations or diminished public participation in civic affairs, millions of Americans are starting to think the rules of the game need to be reinforced or changed,” says Mark J. Rozell, acting dean of George Mason University’s School of Public Policy.

    Rules Change aims to promote cross-silo knowledge, ideas and collaboration on issues like election reform, corporate personhood, success measures and accountability, money and politics, media responsibility and environmental sustainability. Attendees will look at the rules that govern our economic system – from laws and regulations to consumer behavior, participatory government, corporate governance and more.

    “The idea is to pause and collaboratively and consider feasible changes in the rules of the game that promote the public interest,” says John Boyer, a former professor and TV documentary producer who is among organizers of the gathering. “How are we going to get America working better for all of us?”

    One effort championed by the Rules Change Project is The Civic Stewardship Mapping Project, a multimedia effort to document for the public dozens of groups working on rules-change initiatives. “It will be a navigational tool for concerned citizens to find out where and how they can do something,” says Marcy Murninghan, mapping-project coordinator.

    Rules Change is organized around five “rules-change categories” highlighting policy agendas of diverse groups that share the goal of a more just and sustainability society, says Densmore, Rules Change Project coordinator. “Those categories include influence, measurement, ownership, accountability and governance,” says Densmore. “We want to create a time-out space for partisans across the playing field to find common ground on rules — rather than face ongoing gridlock and perceived unfairness in the game.”

    The Rules Change Project seeks input from individuals and groups working on topics such as:

    • Non-partisan redistricting
    • Changes in a “too-big-to-fail” banking system
    • Corporate governance and sustainability
    • Alternate success indicators besides GNP
    • Reducing or revealing the influence of money on Washington
    • Economic policies to rebuild a middle class

    “The rules of American capitalism have evolved from a shared circle of prosperity,” says John Boyer, an event co-organizer and co-founder of the Media Stewards Project. “Business and government leaders once saw four key stakeholders — communities, employees, the environment and customers — as team members along with stockholders. That’s less and less true. America’s economy cannot fairly go on the way it has. It’s time to see if rules change – policy, marketplace, social, ethical — can restore balance among all five stakeholders.”

    ADDITIONAL RESOURCES:

    For additional information contact:

    Bill Densmore, (617-448-6600) / wpdensmore@gmail.com or John Boyer, Co-Founder, Media Stewards Project (703-980-3337) / john@mediastewards.org

  • BOSTON GLOBE: Is ‘shareholder value’ bad for business?

    What is the purpose and structure of the modern corporation, and what are the consequences when management takes a short-term approach to meeting corporate goals?

    . In a recent article, Boston Globe reporter Leon Neyfakh captured the debate surrounding the “future of the American corporation—what its purpose is, how it should be run, and whom it should be engineered to benefit.” The article describes how shareholder-guided corporations often fail to adequately serve other stakeholders such as employees, customers, the environment, and local community. Nayfakh also notes the failures of shareholder supremacy and the harms inflicted on others, even shareholders themselves. He writes: “Countless others made short-sighted decisions intended to goose earnings, keep investors happy, and enrich themselves—all without regard for the long-term health of their companies.” Shareholders, according to Neyfakh, have also been harmed by the status quo and are increasingly advocating for greater representation on boards of directors.

    There are other strong voices in the debate about the structure and purpose of corporations such as Harvard Law School professor Lucian Bebhuk. He argues that there are significant barriers to greater shareholder activism that stem from the near-absolute power of the board and CEO. Bebchuk favors empowering shareholders to make “rules of the game” decisions about the structure of the corporate ballot set by by-laws. Bebchuk explains that these decisions are unlikely to occur because boards and CEOs accrue private benefits from having control over the corporate ballot such as job security, higher pay, and other perks. This problem of board capture also manifests itself in the exorbitant pay of many CEOs which some have referred to as the “smoking gun” of managerial opportunism and other corporate governance failures.

    While the stakeholder model may appear to be a better alternative to the shareholder primacy model, there are unique challenges to detecting and eliminating managerial opportunism under a stakeholder model. If CEO performance is currently quantified in share price and compared to peers, what performance metrics would complement the creation of shareholder value? How would these different metrics be balanced? The inclusion of alternative metrics creates room for CEOs to justify even more egregious pay packages. For example, if a CEO serves the local community and workers well but delivers weak financial results, how much should the CEO be paid? Even under the shareholder model, CEOs are able to justify vast compensation packages to boards and shareholders. During economic downturns, CEOs are paid for performance in spite of various headwinds and obstacles. Insider opportunism is clearly prevalent in the shareholder model and might even be more insidious and frequent in the stakeholder model.

    These challenging questions suggest that the stakeholder model might be more vulnerable to insider opportunism than the shareholder model. As Jonathan Macy and Geoffery Miller warn “constituency statutes do not benefit the interests or groups that they ostensibly are intended to benefit. Rather, such statutes benefit a well-organized, highly influential special-interest group, namely the top managers of large, publicly held corporations who wish to terminate the market for corporate control.”

    Together, these issues represent an essential point of focus for corporations, politicians, and citizens alike. Accordingly, the Rules Change team will provide coverage on issues of corporate governance as they continue to unfold.