Business and Society Program

David H. Langstaff Remarks

Business and Society Program
July 5, 2009 Annual Gathering

I want to add my welcome, and thanks, to everyone for joining us this year.  I want to particularly thank Judy Samuelson and her colleagues – Nancy, Rich, Rebecca, Mary and Sarah – for their excellent work.  I have had the pleasure of chairing the Advisory Board for the last few years, and more importantly, to be part of this initiative for the last decade.  Over that time, I have had a number of accomplishments in building a billion dollar company and taking it public – but there is nothing of which I am more proud than the work and accomplishments of the Business and Society Program.

Judy asked if I would “reflect on what the changes in the economic and political climate have meant for your own personal and professional orientations.”  So, I will.  I don’t expect everyone to agree with what I have to say; but, I do hope that it will set the stage for a thoughtful dialogue over these next few days.

It is easy to comment on all that is wrong, and what went wrong over the last few years.  But, as is my nature, I see new opportunities that have been created … a silver lining to these economic challenges.

Yes, we have to clean out the bad actors, and address the weaknesses of the system.  We also have to recognize that people have been badly hurt – in life-changing ways – by what has occurred.  

But… people are also now rethinking what is important – as individuals, as members of society, and as business leaders.  People are re-examining what they stand for, and examining personal and institutional values.  I believe they are seeking a clarity of purpose.  

We have the opportunity now, perhaps with a more open mind, to revisit topics which we have taken for granted in the past.  I would like to touch on a few of these points, and then come back to this topic of “purpose.”

The future of capitalism – there is a great dialogue underway, and a lot has been said.  
There are those who believe we should throw it out, and others who believe we just have to get through this “dip,” and then it will be back to business, as usual.  

Both positions are wrong – although, I must express concern about the attitudes of our financial industry, which seems to be in the latter camp.  A case in point:  we have all read in the last few days that Goldman Sachs is positioned to pay out the highest bonuses in its history.  What are they thinking?  How will the public react to this news if it, in fact, occurs?

The Financial Times has provided a forum for an excellent discussion on the future of capitalism.  Pritam Singh, a British Lecturer of Economics, has written of “capitalism lacking a soul.”  Others have written about the need to elevate the value of arts, and music, in society (The Aspen Institute figured that out over fifty years ago!).  Philip Blond, the British philosopher, has challenged us to rethink what we want in a good society; for him, it is “… one that people want to live in:  empowered, secure, and sustainable communities of shared virtue and prosperity.”   

Arthur Okun, economic advisor to President Johnson, reminded us over 35 years ago that “the market needs a place, and the market needs to be kept in place.  Given the chance, [the market] would sweep away all other values and establish a vending machine society.”

We are in the midst of a good discussion… BUT …. We are not hearing the voice of business leaders as we should.  Where are they?  The reason we rank pretty low in society’s view today is due, in part, because we are simply not present; we are not seen to be stepping up.  Most troubling, we are not trusted to consider society’s best interests.

On the flight here this morning, I read Jamie Dimon’s letter to shareholders of JP Morgan Chase, written a few months ago.  He writes about JPMorgan values and purpose; he addresses how and why JPMorgan has taken the steps that it has taken; he directly takes on the issue of executive compensation in a responsible fashion.  Perhaps most importantly, he addresses these issues first in the context of JP Morgan Chase’s role in society, and not just from the perspective of what’s good for its shareholders.  It is worth reading; we need more voices like Jamie’s…. and louder!  

Another voice worth noting is that of Indra Nooyi, Chair and CEO of PepsiCo – particularly in her speech in Washington to the Economic Club of Washington a few months ago.  In it, she specifically identifies the work of The Aspen Business and Society Program, and Judy and her team, in confronting “short-termism.”

There are other topics to revisit, and as you might expect, BSP is actively examining a number of them.  The Corporate Values Strategy Group is building on the Aspen Principles, and looking at the complex subject of how and where to strengthen the regulatory framework.  Rich, Nancy and Mary continue to examine business education, and how we teach ethics in business schools, and give people the courage to find their voice and act on their values when they know something is wrong.

There are two other topics that are high on my list.  

First, I continue to be surprised by the lack of attention paid to the role of boards, and their lack of accountability.  I believe we need to rethink the role of the board, and to re-emphasize its responsibilities in the area of strategy, not just compliance.  Frankly, I believe we need to re-examine the basic governance model under which boards operate.  I don’t believe that getting together a day or two a quarter, or even every two months, is sufficient for boards to do their jobs.  There is, in fact, a real job to be done, and today – in many instances – it simply is not being performed.

The second topic I want to touch on is the point I mentioned at the beginning:  to introduce a discussion around “purpose.”  We can have the discussion at two levels – and both are important:  at the macro level, where we need to consider the purpose of the corporation, and at the micro level, which questions the purpose of any one corporation.  

In the larger context, we like to talk a great deal about a corporation’s rights; I think we need to have more conversation about its responsibilities.  The corporation, as I understand corporate law, was never intended to be solely “just” for its shareholders; it was conceived in the context of a responsible contributor to society.  As a society, we need to be clear as to what we want, and what we should expect from the corporation.

At the individual corporate level, company boards and CEOs need to ask the fundamental question:  what is it for?  Companies need to have a sense of purpose – of mission – that goes beyond shareholder returns.  How many times have you heard executives say:  “our goal as a company is to maximize returns for our shareholders”?  What kind of a goal is that?

My experience, having built and run a professional services company, is that clarity of purpose (that is, mission) matters.  It is the key to unlocking employee commitment, building loyalty and a positive operating culture, and enhancing productivity, and overall performance.

The ones who “get it” now may be those involved in “social enterprise,” and “social entrepreneurs.”  I am trying to understand why we have a category called “social enterprise.”  I am not sure what the difference is with other companies – other than they have a clear sense of purpose as their dominant focus, defined in the context of society, not just its shareholders.  And, they place equal emphasis on the “how” work is done, and not just the “what” they do.   Isn’t this the essence of the Johnson & Johnson “Credo” established over one hundred years ago?  

All companies should have a similar sense of purpose.

Before leaving the point, there is another significant reason why “purpose” is important:  it re-introduces the time factor  – particularly the long-term – back into the discussion, for most missions cannot be accomplished in a quarter, or even a year!
 
Let me close around two final thoughts.

First, at a time when we train, educate and reward specialists and “experts,” I would like to make the case that we need more generalists!  Specialization – while it certainly drives knowledge forward – is a form of “dis-integration.”  We need more people who can think, and see how all the pieces come together; we need holistic thinkers who can integrate.  [I think I have just made an argument for a liberal arts education!]  As a case in point, look at how Congress began to address the AIG bonus problem, with legislative initiatives to tax all bonuses at 80 or 90%.  We will spend the rest of our time sidetracked by having to deal with the unintended consequences of well-meaning, but narrow thinking.  We need to understand the “big picture,” and how the different elements influence each other.

Finally, for me, it all comes back to LEADERSHIP.  I don’t mean to downplay the function of management, but we need more than simply management.

Reflect, for a minute, on what I consider to be the foundational characteristics of leadership:

• Vision – or a clear sense of purpose;
• Humility to listen, and to hear those who disagree;  but also, the ability to articulate, empower, and energize people to follow;
• Clear values;  a strong ethical foundation;  and,
• The COURAGE to lead…. To act.

If you look back on the last few years, or decade (!), we – businessmen, taken as a group – have fallen short on every dimension.

I believe that integrity comes from acting, consistently, in accordance with your values.  From integrity, you earn trust.  Within a company, a culture of integrity and trust leads to loyalty, pride, committed employees, and ultimately, high performance.  Within society, we need the same thing in order to change the perception of business, and of business leaders….  because we need to rebuild, and re-earn what is now a broken trust.

Perhaps it is in this discussion, and the hard work that must follow, that we find the seeds of a more responsible capitalism.  

Thank you.