bout de papier, Vol. 30, No. 3 (2018), pp. 35–36
EDITED BY DOMINIC BARTON,
DEZSO HORVATH AND
MATTHIAS KIPPING
OXFORD UNIVERSITY PRESS,
ENGLAND, 2016
368 pp, $51.25
Mumbai is a late night town. Typically, Bollywood does not start work until late in the afternoon. Business dinners start at 10 p.m. Visiting Canadian ministers are often not received at Varsha, the chief minister’s official guest house, until even later.
So, it was somewhat surprising to see top corporate leaders from Tata & Sons, Hindustan Unilever, Walmart India, McKinsey & Company and others come together before breakfast at the Taj Mahal Palace Hotel. Even more surprising that the focus of their early start was the launch of a volume of essays edited by three prominent Canadians.
The book Re-Imagining Capitalism is a call to action. Its editors, Dominic Barton, Dezsé6 Horvath and Matthias Kipping contend that capitalism is under threat. They say that capitalism, which survived the Great Depression and the rise of communism, is facing its greatest onslaught yet with critics blaming it for everything from rising income inequality to global warming.
Horvath, currently the world’s longest-serving business school dean, having run the Schulich School of Business at York University for 30 years, says that mismanaged capitalism in the United States and the United Kingdom has given rise to the populism that elected Donald Trump and led to Brexit.
According to Horvath, corporate leadership in these countries since the 1970s has been unduly fixated on short-term quarterly earnings and responsiveness to shareholders rather than stakeholders. This has contributed to a slow decline in per capita spending on research and development in the United States, greater income inequality and a shrinking middle class.
During the 1990s, the notion of “responsible capitalism” surfaced as described by Dominic Barton, Global Managing Partner at MclInsey, in his ground-breaking article “Capitalism for the Long Term” published in the Harvard Business Review in March 2011. That article was the catalyst for a partnership with the Schulich School. A one-day conference in Toronto in 2012 followed, which led, in turn, to the genesis of Re-Imagining Capitalism.
On this morning, with the sun rising over the Gateway of India and the Arabian Sea beyond, Barton says that his “awakening” came shortly after he became McKinsey’s Global Managing Partner and moved from Asia to London. He had made it a rule to meet two CEOs a day. And he saw a big difference between the way business was being conducted in the two places. “I was quite shocked at how short-term things were in the West.”
McKinsey’s research shows that the average lifetime of companies is decreasing: In 1935, the average lifetime of an S&P 500 listed company was 90 years. Today, it is only 15. Moreover, with 87 percent of executives feeling pressure to deliver results in 1—2 years and heightened sensitivity to the demands of shareholders which are, themselves, increasingly short-term, public companies now invest less — their net annual investment amounts to about 2.2 percent of the value of their assets, as compared with 9.4 percent for privately held companies with a longer-term view.
The book includes essays from academics, business leaders and non-governmental organizations.
John Kay, a leading British economist, argues in “Understanding and Misunderstanding the Triumph of Capitalism,” that economic policy has “gone seriously wrong in the last two decades” and has permitted the concentration of economic power.
Fellow academics R. Edward Freeman, Bidhan L. Parmar and Kirsten E. Martin assert that a “stakeholder theory” of capitalism holds at least part of the answer for reform, a recognition that successful firms continuously create value, not just for themselves, but for customers, suppliers, employees and communities.
Ratan Tata, former chair of the Tata Group of Companies and current chair of the Tata Trusts, a philanthropic organization that holds two-thirds of the stock of Tata and Sons, the group’s apex body, agrees.
“Unfortunately, capitalism has transitioned over time to become self-serving rather than serving the community at large,” he told the gathering of Indian executives present. “The creation of prosperity among the wider population over the long-term is where success comes from, not creating distrust.”
Tata’s contribution to the book, entitled “Corporate Community Involvement in the 21st Century,” describes the company’s unprecedented work creating jobs and benefiting communities where it operates.
Simon Zadek, Co-Director of the UN Environment Programme Inquiry into the Design of a Sustainable Financial System, argues in his chapter that profound changes in the world economy, coupled with a rapid transition to a low-carbon regime, offer an opportunity to design a new financial system that will support a longer-term sustainable view.
And in their contribution, Robert G. Eccles and Birgit Spiesshofer contend that a similar impact can be had at the corporate level through the adoption of “integrated reporting” that emphasizes sustainability and relations with stakeholders in addition to value for shareholders.
While the contributors to Re-Imagining Capitalism are international in origin, the ringleaders, Barton and Horvath, bring a decidedly Canadian perspective to the table. Their message comes at a time when the world is dealing with a confused populism in the United States, and Global Affairs Canada is espousing “progressive trade” to address some of the challenges that unbridled capitalism coupled with free trade are perceived to create.
Schulich’s MBA program has certainly emerged as a standout, having been ranked number one in the world for responsible business by both the Aspen Institute and by Corporate Knights.
Support from the Government of Canada has helped the school spread its wings. Horvath credits the former Canadian International Development Agency with helping Canadian business schools establish in Asia. For its part, Schulich now has campuses in Hyderabad and Beijing.
The book launch in India and another planned event in China have both attracted a lot of attention. However, they have also shed light on a different set of challenges facing capitalism in emerging economies. Horvath readily admits this, hinting at a sequel to the book focused on emerging markets, as the Schulich School continues to go global with its message of responsible capitalism.
Originally published in bout de papier, Vol. 30, No. 3 (2018), pp. 35–36. Read the rest of this issue →
