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The unfinished business of stakeholder capitalism

January 12, 2021, 10:22 AM UTC

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Good morning.

There’s a new book out today, The Six New Rules of Business, from Judy Samuelson, who started the Aspen Institute’s Business and Society program in 1998 and remains there today. From that perch, she has watched the evolving role of the corporation over the last two decades. Her book looks at fundamental changes that have occurred as hard assets and financial capital have become less important, and reputation, intellectual property and human capital have become more so.

Like me, she believes those changes have led business to focus more directly on its impact on society—a change reflected in the Business Roundtable’s statement on stakeholder capitalism last year. “The BRT statement was an important marker. It clarified intentions.”

But yesterday, Samuelson told me she also believes there are at least three significant pieces of unfinished business—“blind spots,” she calls them—“that are holding companies back” from making their new stakeholder intentions a reality. The three:

Executive pay. Over the last decade, senior executive pay has gone up 7% a year, she says, while middle managers on down have seen only 3% increases. Why the discrepancy? Because top managers are paid in equity-related rewards, that reflects returns to shareholders. “As long as Total Shareholder Return is at the center of how we pay executives…that’s the antithesis of what the Business Roundtable said.” 

Contract workers. At a time when companies are focusing more on the needs of their employees, their “contract workers remain a blind spot. Contract work “is a huge source of creation of poverty…and that’s a choice companies are making.”

Taxes. “We are going to have another reckoning on taxes,” she says. “The intentions that were set when a lot of us supported reducing [corporate tax] rates was…to make sure we brought everybody up to that rate.” But games played, particularly by global corporations taking advantage of international tax shelters, have undercut that goal. 

All three are topics most CEOs are reluctant to discuss. But they will have to be resolved before stakeholder capitalism becomes reality.

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

TOP NEWS

Impeachment vote

House Democrats will vote on the second impeachment of President Trump tomorrow, having introduced an article of impeachment, for incitement of insurrection, yesterday. The House vote will likely go their way, making Trump the first president to be impeached (i.e. indicted) twice. However, even though the subsequent Senate trial will take place after the Democrats take control of the Senate and Trump is already out of office, it’s unlikely that two-thirds will vote for impeachment. Wall Street Journal

PayPal block

PayPal has blocked a Christian crowdfunding site that raised funds for people who attended last week's Capitol riot. The payments firm blocked GiveSendGo as well as an account held by riot organizer Ali Alexander. Reuters

AstraZeneca application

AstraZeneca has formally asked the European Medicines Agency to authorize the marketing of its relatively cheap, easy-to-deploy COVID-19 vaccine. The EMA says it may be able to issue a decision by Jan. 29, largely because it has already reviewed some data about the vaccine. RTE

U.K. tests

The U.K. will from Friday finally start requiring new arrivals—by plane, train or boat—to have taken a COVID-19 test up to 72 hours before departure. Hauliers and transport crew will be exempted, as will people coming in from the Falkland Islands, Ascension Islands and St Helena. BBC

AROUND THE WATER COOLER

Pausing donations

Fortune's Phil Wahba examines the decision by companies such as Marriott International and Blue Cross Blue Shield to stop funding lawmakers who tried to disrupt President-elect Biden's victory certification, and notes that most corporations have avoided naming President Trump himself in their statements about last week's attempted coup. So too did the Business Roundtable. Fortune

Jobs record

President Trump will leave office with the worst jobs record of any president since Herbert Hoover, who exited the presidency early in the Great Depression. Although Trump's term was mostly marked by expansion of employment, it turned to contraction when COVID-19 hit, leaving him with a -0.5% annualized job growth rate rather than 1.5%. Fortune

Chinese cars 1

The Chinese electric-car firm Xpeng just secured a $2 billion credit line from financial institutions including Bank of China, China Construction Bank and Agricultural Bank of China. China's state-owned banks tend to prefer to lend to state-owned enterprises, but Xpeng raised more than $4 billion last year in its NYSE IPO and a follow-on offering. CNBC

Chinese cars 2

Tesla is looking for a "bi-cultural" design chief to tailor vehicles for the Chinese market, which is its second-largest after the U.S. Seems like a similar strategy to what Tesla is pursuing in Europe, where CEO Elon Musk has also talked about making something in line with local tastes, i.e. a small hatchback. Reuters

This edition of CEO Daily was edited by David Meyer.