The Gray Valley: Excerpts from ‘The Corporation in the 21st Century’ by John Kay – Lifestyle News

The loss of trust

Corporate reputation has taken many hits over the past twenty years. The collapse of Enron in 2001 was symbolic of a decade of excess in the 1990s; the revelation of the company’s fraud demonstrated the extent of the hubris that characterized the heady years of “the new economy.” Other collapses occurred during that time: cable operator Adelphia Communications failed after being sacked by its CEO, John Rigas; at telecom company WorldCom, former basketball coach Bernie Ebbers’ defense that he had little insight into what was going on may have contained more truth than the court recognized when it sentenced him to twenty-five years in prison.

The 2008 financial crisis had an impact on public confidence that continues today; Executives were exposed not only as greedy and corrupt, but also as lacking the fundamental skills needed to run successful financial services businesses. Unlike the previous imprisonment of Rigas, Ebbers and Enron’s CEO Jeff Skilling, only very young individuals ended up in prison after the global financial crisis. Some more recent scandals have led to criminal charges against the executives responsible. Volkswagen falsified emissions data from its cars and Wells Fargo created 2 million fake customer accounts. Silicon Valley celebrity Elizabeth Holmes attracted celebrities to her board. She was admired in American business magazines and achieved a $10 billion valuation for her company before it was revealed that the blood testing product she was promoting did not exist. In 2022, she was convicted – not of misleading patients but of misleading investors – and sentenced to eleven years in prison.

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But many perpetrators of egregious behavior have remained within the law. The elaborate artificial tax avoidance schemes that have become commonplace among large multinational corporations are attracting increasing public attention. And the widening gap between the pay of top executives and the earnings of rank-and-file workers has sparked widespread concern. Some of these billionaire executives are not superstars: individuals such as Philip Green, who extracted nine-figure sums from retailer BHS before selling the company to the multi-bankrupt Dominic Chappell for £1, Mike Ashley, the dominant boss of retailer Sports Direct, and Eddie Lampert, who inflicted similar destruction on Sears, America’s largest retail chain for a century. The lifestyles of these executives contrast with the fate of their companies. Green and Lampert’s 300-foot yachts make good newspaper photos. Green’s is moored in the harbor of the tax haven Monaco, where he lives, while Lampert’s is named Fountainhead, after Ayn Rand’s turgid paean to individualism.

And then the poster children of the Internet world became the companies everyone loved to hate. Google’s slogan ‘Don’t be evil’ was ridiculed and replaced with the motto ‘Do good’, which was quietly dropped not long after. Lina Khan’s essay lambasting Amazon, published in 2017 while she was still a student at Yale Law School, received widespread attention and in 2021, President Biden nominated her to chair the Federal Trade Commission. Mark Zuckerberg – who still resembles the Harvard student who launched Facebook from his dorm – became a maligned figure. For Adrienne LaFrance, not a demagogue but editor of the respected magazine Atlantic, Facebook was “an entity engaged in a cold war with the United States and other democracies,” “a lie-spreading instrument for the collapse of civilization.”

The successful companies that define the modern economy are not well regarded, especially among the young people who are often the most dedicated users of their products. In 2022, 40 percent of adult Americans under the age of thirty viewed capitalism favorably; but slightly more – 44 percent – ​​viewed socialism favorably. (The poll found that respondents approved of both capitalism and socialism. Among those over sixty-five, capitalism was far ahead.) Of course, this finding leaves open what poll respondents understand by “socialism”; the term has been highly interpreted. otherwise by Lenin, Xi Jinping and Bernie Sanders.

Or what respondents understood by ‘capitalism’. In his 1946 essay Politics and the English Language, George Orwell noted that “The word fascism now has no meaning except insofar as it means ‘something undesirable’.” Orwell continued: ‘It is almost universally held that when we call a country democratic we praise it. That is why the defenders of any kind of regime claim that it is a democracy.’ (This heuristic remains valid today: the regime over which Kim Jong-Un presides calls itself the Democratic People’s Republic of Korea; cynics have noted that any word except “of” is misleading.)

Something similar has happened with the word ‘capitalism’; it has become a term of disapproval, or, even more rarely, of approval, without more specific content. Usually, “capitalism” is something the speaker blames for an outcome he or she doesn’t like. In the words of journalist Annie Lowrey: ‘Late capitalism became a catch-all for incidents that reflect the tragicomic absurdity and inequality of contemporary capitalism. Nordstrom sells jeans with fake mud on them for $425. Inmate phone calls cost $14 per minute. Starbucks forces baristas to write ‘Come Together’ on cups.” More seriously, popular critical discourse emphasizes the connection between “capitalism” and “inequality,” usually without defining either of these complex and ambiguous terms or explaining the relationship between them.

Love the product, hate the manufacturer

And yet… Boeing created the modern civil aviation market, allowing millions of people around the world to travel affordably. Every day, people step off a Boeing plane to start their vacation, attend a business meeting or reunite with friends and family. Both Facebook and Google have more than 2 billion active users – far more customers than any other company in the history of the world.

In the three centuries since the start of the Industrial Revolution, business has created previously unimaginable comfort and prosperity for much of the world’s population. People trust their employers more than they trust the government, although in the US only Congress is less trusted than big corporations. Americans consider small businesses to be very trustworthy. Most readers of this book will have recently encountered employees who truly put the customer’s interests first: the helpful store clerk, the reassuring flight attendant, the dedicated nurse or doctor, perhaps even a financial advisor who took the time to understand the specific understand customer needs. client.

About 6 million companies are registered in Britain and more than 30 million in the United States. The vast majority of these companies employ fewer than five people. Typically these are convenience stores, plumbers and electricians, community advocates and doctors. Of course, some plumbers are more competent than others, but the profession they all practice is largely the same and they are mainly distinguished from each other by the location in which they operate.

This book is not about these microenterprises, as essential as they are to modern economies. This book is about Goldman Sachs and Boeing, Merck and Pfizer, Google and Apple. These are companies with distinctive combinations of capabilities that have allowed them to scale their operations, operate globally, and employ thousands or tens of thousands of people. Companies that, as an organization, add value to the talents of the individuals who work there. Companies whose activities touch the daily lives of millions of people and influence the politics and societies in which they operate.

Reprinted with permission from ‘The Corporation in the 21st Century’ by John Kay, published by Profile Books