Time has come for closing arguments in our debate with Felix Salmon. In his final shot he offered up the typically provocative (and false) assertion that ‘Philanthrocapitalism coddles CEOs’. This came as a bit of a surprise, since we have written extensively about the failings of corporate bosses to grasp the scale of the challenge needed to make business more part of the solution to, rather than the cause of, the world’s problems.
Of course, this being Felix, the only evidence to support the charge of coddling that he presents is that, in his view, CEOs will agree with what we say. Yes, some do – because there are CEOs out there, like Indra Nooyi of PepsiCo and Paul Polman of Unilever, who do seem to be trying sincerely to rethink how their business runs. Yet there are many who don’t, as we have pointed out, because it is easier to restrict your corporate do-gooding to some PR-driven philanthropy, or to hide behind Milton Friedman’s dictum that the role of business is to maximise profits.
Felix goes on that when we say that a better capitalism is not about CEOs alone we are letting them off the hook. Not at all. We are trying to move the debate on from one about good and bad CEOs to look at fundamental issues about the incentives in the whole system. One of the commenters on his post puts it rather well, discussing the issue of CEO compensation:
“As long as compensation is based on the performance of each company and the measures of performance are financial, sales, profit, stock price etc etc or some mixture of these numbers, and the time frame is short term, mostly single year performance, all the discussion of “long term”, “enlightened self interest”, is so much crap.”
Indeed. That is why, in ‘The Road From Ruin‘, we argue for corporate governance reform, changes in the rules guiding institutional investors, new ways of measuring corporate and national economic success, and greater public engagement with how companies are run. These are arguments that Felix, sadly, will neither support nor even engage with.
There is, however, one accurate charge in Felix’s article – that (alas, some years ago now) Matthew was honoured as a Young Global Leader by the World Economic Forum. Why this matters and, indeed, is a central plank of his argument is unclear. (It presumably isn’t a criticism, as his colleague and editor-in-chief of the digital arm of Thomson Reuters, Chrystia Freeland, is also a Young Global Leader, and Felix himself attended this year’s World Economic Forum in Davos – at least, when he wasn’t swilling fine wine or skiving off skiing.) Yet maybe this makes sense in Felixworld, where it’s all about personalities rather than ideas.