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Good morning.
In honor of election day, Ellen McGirt and I hosted a debate on our podcast Leadership Next. The topic: Stakeholder capitalism, pro or con?
Taking the con was Lucian Bebchuk, professor at Harvard Law School, who published a major academic paper earlier this year called The Illusory Promise of Stakeholder Governance. It’s long, but in a nutshell, he thinks the Business Roundtable’s statement last year that companies have responsibilities to society equal to their responsibilities to shareholders is “largely cosmetic.”
“First, corporate leaders do not have significant incentives to protect stakeholders beyond what would serve shareholder value. They simply don’t. And secondly, we have to look at the evidence, and the evidence colleagues and I have put forward is that in fact when CEOs and other corporate leaders face choices, they do not give independent weight to the interests of stakeholders.”
On the pro side, we went (virtually) across the Charles River and found Harvard Business School’s Rebecca Henderson, author of Reimagining Capitalism in a World on Fire:
“I respectfully disagree. I think the BRT statement is quite important. I believe what we might call rhetoric or culture or our understanding of what the goals of the corporation are, is super important. For the last 40 years, we said the goal of the corporation is to maximize shareholder value. Shifting the goals makes a lot of difference.”
I don’t want to give it all away here, but their disagreement—which they had never debated together before—comes down to this: Bebchuk said CEOs still have incentives and rules that require them to deliver primarily to shareholders. Henderson acknowledges that, but goes on:
“I think the debate is more interesting than this. I believe there are an important class of actions that benefit both the shareholder and the stakeholders that many firms have not focused on (in the past) because they have been so focused on shareholder value that they have not taken a longer-term perspective.”
This, of course, is what we heard from many of the corporate leaders on our podcast this year—that stakeholder capitalism is about “win-win” solutions, which deliver benefits to society and to shareholders. Bebchuk responded that there is “something puzzling” about the idea “that corporate leaders have not noticed this is important for maximizing value” before now. To which Henderson emphatically responded:
“Leaders of major corporations are bad at seeing discontinuous changes in their environment…I spent the first 20 years of my career working with firms like Kodak trying to persuade them the world was changing. I spent six months with Nokia in Finland in saunas in the middle of February trying to convince them that Apple was really a threat to their business…There are real cognitive barriers to doing things differently.”
Readers of this newsletter know where I fall in this debate. But these two professors animate it with an eloquence I never could. Take the time to listen, on Apple or Spotify (but not on Nokia.)
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Bayer writedown
Bayer has taken impairment charges of $10.8 billion over two big issues: lower biofuel prices causing weak demand from farmers, and the Roundup settlement proving pricier (by around $750 million) than anticipated. CFO Wolfgang Nickl: "The impact of the (coronavirus) pandemic is placing additional strain on our Crop Science Division. We are also facing negative currency effects." Reuters
Honda, FCA and Tesla
Honda has joined Fiat Chrysler Automobiles and Tesla's pooled fleet, for the purposes of meeting European emission standards. As FCA has been doing for a while, Honda will get to benefit from Tesla's regulatory credits, garnered from the fact that Tesla's cars are all-electric. It is not yet clear how much Honda is paying Tesla for the privilege; Tesla pulled in almost $1.2 billion in revenue from selling such credits this year. Bloomberg
Robots 1
Ocado, the U.K. online-grocery giant known for its forward-thinking warehouse technology, has bought two U.S. robotics companies to continue its automation push. The biggest buy is that of Kindred Systems, whose customers include Gap and American Eagle Outfitters, for $262 million in cash and stock. Ocado is also shelling out $25 million in cash and stock for Haddington Dynamics, which makes a sophisticated robotic arm for the likes of DuPont and NASA. Fortune
Robots 2
Walmart has ended its longstanding push to have inventory-tracking robots roving around its store aisles, after learning that humans do just as good a job. It was also worried about customers' reactions to seeing robots in stores. The end of Walmart's five-year contract with Bossa Nova Robotics led the latter firm to lay off half its staff. Wall Street Journal
AROUND THE WATER COOLER
PayPal crypto
PayPal has put flesh on the bones of its planned cryptocurrency push. According to CEO Dan Schulman, PayPal will from early next year let customers pay for stuff using their cryptocurrency accounts, and to use the firm's Venmo peer-to-peer payment service to buy and shop using cryptocurrencies. Schulman said the bullishness came from a better-than-expected reaction to PayPal's initial crypto announcement last month (that it will allow customers to buy cryptocurrency within its app.) Fortune
Too close
Raghavan Mayur, president and founder of TechnoMetrica and leader of the IBD/TIPP poll, writes for Fortune that the presidential race is actually too close to call, despite Biden's apparent lead. Why? Because there's a larger margin of error in swing-state polls, and because of the COVID effect in swing states. Fortune
German fail
The EU's markets regulator has criticized German watchdogs over their deficient supervision of the collapsed payments firm Wirecard. The European Securities and Markets Authority began a fast-track review of the situation in July, and today reported back on failures by BaFin, the German regulator, which it suggested was overly susceptible to political influence. Reuters
Alphabet vs depression
Google parent Alphabet revealed that, for the last three years, its X division has been working on a mental-health "moonshot" called Project Amber. The project's researchers have developed an EEG cap for monitoring electrical activity in the brain, and tools to analyze the data, so they can look for signs of depression and perhaps even predict episodes. They originally worked on a depression diagnosis tool, but doctors said this wasn't needed. CNBC
This edition of CEO Daily was edited by David Meyer.
