[Music]
in 1966 there was a young man who loved
the Chicago Cubs he loved him so much
he sued them see the Chicago Cubs had a
problem they were losers and this young
fan said I know why they’re losing said
the Cubs don’t have lights at their
field at Wrigley Field and he had some
data and he said you know every time the
Cubs would play at home and their eyes
would get used to playing in the middle
of the day they’re going on the road to
New York as st. Louis they lost and they
lost a lot so he said I’m a shareholder
of the company his grandfather had given
him a couple shares of the company the
Wrigley company and he sued as a
shareholder he said you know I own part
of this company you have to listen to me
so why am I telling you this well
underneath all of this is a really
important question a fundamental
question for all of us and that is who
does the corporation work for does it
work for the shareholders does that work
for employees does it work for customers
does it work for the executives I mean
this isn’t some arcane kind of business
II think this is about employers and
workers this is about you and me so the
program I work for marketplace public
radio we reported this series on this
question and I want to tell you what I
learned most important I want to tell
you what I got wrong the assumptions
that I had proven wrong in the course of
my reporting see I wish thought that the
shareholders were first that maximizing
shareholder value was the job of
corporations in America it turns out
that hasn’t always been the case
employees I thought employees were
always last in line but that wasn’t
always the kiss it actually changed in
the course of my lifetime
it just wasn’t paying attention so I
grew up in the awful 70s and the Kipp C
New York middle of nowhere New York my
dad worked for IBM the only thing I
remember about that time was going to
country club it was a free perk for
every employee who worked for IBM he
could bring your spouse or family and so
we were there all the time me and my big
brother and my parents and we went to
the pool there actually was the pools
there were two pools my big brother went
to the bigger the bigger Olympic sized
pool of the diving boards and I was with
the younger kids at the smaller pool
temperature was curiously warmer in the
water there you know the story and that
well not the pool part but the Country
Club part was a picture of Corporate
America in the post-war years and then
the benevolent company it took care of
the whole family from Monday to Sunday
from womb to tomb as some people put it
if you got sick the company gave you
insurance when you retired their company
did your pension and IBM it also gave
you a watch and that was which is kind
of how corporations work the corporation
was the organizing unit of society in
post-war America those are the words of
a business professor named Jerry Davis
at the University of Michigan right left
revolved around the corporation and I’m
going to show you something this is the
General Electric Company in 1953 it put
out a tally of where the money of the
company goes and it kind of showed the
importance of where they put their money
so after paying the government their
passes and after paying suppliers 36
cents of every dollar that came in went
to the workers fair for the money went
to their workers one cent of each dollar
went to research and what was left over
the last three point nine cents that
year went to the shareholders so the
people who owned stock in the company
were explicitly last in line at the time
employers were workers were first in
line and the stockholders were last in
line and it wasn’t just GE wasn’t just
IBM this was stated explicitly in one
way or another at companies like Kodak
coca-cola General Motors it’s just kind
of how how it was this is this was kind
of a belief system where companies
didn’t have to do this in fact
historically companies did a lot of
public things that were beyond their
narrow self-interest back in the day
come
build canals that built roads if you go
all the way back to 1600 in the East
India Company they coined currency they
ran ports so companies were had these
public purposes and they didn’t have to
do it it was basically a belief system
that’s what I learned in the course of
my reporting basically a fad it didn’t
have to do this and over long periods of
time sometimes fads change right they go
out of fashion so I’m in 20 here wearing
blue pants and brown shoes it’s kind of
a thing now and I’m quite certain that
before long it’s not going to be a thing
anymore right my daughter’s gonna say
dad what were you thinking all right
it seemed a good idea at the time in
corporate America that seemed like a
good idea at the time was this panel a
benevolent corporation with employees
first in line and then it started to
change in the 70s because the
gold-plated American corporation started
fall apart our competition from Germany
and Japan started coming from overseas
great industrial companies and our
factories started to close or shut down
and the employees started to lose their
jobs and some of these have kinds of
problems as you’ve read or you remember
we had inflation we had a stagnant
economy we had had big economic slump
also back down a lot of people talk
about stagnation another word that
didn’t take as much was in slump at the
time you know but but in technical terms
the 70s economically they sucked it was
it was a really bad time and so the
great American thinkers of the economy
has started saying well maybe a new
gospel of how corporations should do
that gospel was the free
economy and one of the early preachers
was a man named Milton Friedman before
the year before in 1970 Milton Friedman
economist at the University of Chicago a
very thanks article in The New York
Times Magazine
misson the job the corporation is just
is to make money it’s not to do all
these other things he said corporations
don’t have soul they’re their artificial
corporation it’s an artificial person he
said so what job is not to reduce
pollution its job is not to reduce
inequality no its main job those things
he said are pure socialism in 1970 he
said the job the corporation is simply
to make money for the shareholders
they’re the ones who put their money
into the company and if you use the
money for anything else you’re wasting
these people’s life and so this was kind
of a building block of this new church
of the free market and other preachers
of this idea started coming on board
Ronald Reagan in the 80s the British
Prime Minister Margaret Thatcher was one
of these creatures as well and so
suddenly it became the new buddy system
right this was not something where the
came down from the mountain and people
so this is how it has to be nobody has
to bill say this has to be it was just a
fad it was it was blue pants and brown
shoes and suddenly we all started to to
my internist this notion of market
thinking got into all of our vocabulary
and we’re going to hear it today I use
it all the times of it so instead of
learning I talked about expanding my
human capital using economic insurance
right and my net worth of social capital
formerly known as for friends this is a
true story about a week ago I caught
myself I was trying to decide whether to
eat a cupcake in the middle of the night
and I thought myself doing a
cost-benefit analysis okay so something
else economic mumbo-jumbo has become
English and that’s kind of always become
down and so at companies like General
Electric what we found was a lot of the
money because of this obsession with
shareholders a lot of money no longer
went to the workers a lot of the money
went to the shareholders because we all
started buying into this and we all
started kind of joining this this church
because it really changed the economy of
the nineteen eighties yes ninety took
off like on this group stock markets in
the 80s and 90s it expanded 12 times in
corporate life really started to change
what happened to us a lot of the
companies started to buy one another you
maybe remember this if you were around
them these billionaire investors where
borrowed billions more money to take
over entire companies so if you
remember that timer or to show off their
friends you talk about the leverage my
house the hospital takeovers at the time
work better yet you can refer to the
movie Wall Street from 1987 know a lot
of you work may not have been around in
1987 but the main scene there was
starring Michael Douglas and he was the
soleus investor guy on Wall Street a
slick back hair and a suit with
suspenders above fats right and he was
that meeting with all these shareholders
at a company called tilt our paper we
still had paper in 1987 and and investor
hold a meeting he talked to these other
shareholders our economists said you
know all these vice presidents here
about wisdom are you might know you
needed to change the company to take
over this company and if you act in your
self-interest everything’s going to work
out and the money quote from the movie
is when Michael Douglas’s greed is good
greed is right greed works spoken like a
true shareholder sitting in the first
pew right at the Church of the free
market and that’s how a lot of the the
economy changed for us shareholders were
first in line so the question is or
where the workers in all this and less
than they’ve changed for us because our
job security really went out the window
our pension is not so much and and we
started to really struggle as the
American worker so the small corporate
social contract that you develop in
post-war America start
there’s a lot in country club model it
didn’t really it didn’t really exist
anything you might think okay maybe this
is just how things have to be maybe
corporations had to do this to survive
and this is just a bizarre but it turns
out my critics said this model went
overboard and they’re really asking the
question is we need to change this model
and as they see it this model this
perhaps obsession with stockholders and
stock price has resulted in a bunch of
disasters that we’ve seen not too long
ago disasters like the Enron scandal the
decayed oil spill the financial crisis
of 2007 in 2008 and they say another big
trade off of where we are today
is innovation back in the day patient
capital investing your company money
into research for long periods of time
delivered the railroads delivered
electricity from their country the
internet breakthrough drugs and who’s
going to do that anymore
that’s the question if you’re spending
all your money or largely focused on
investors in the stock price was going
to do that anymore so some of the early
evangelist of this of this new church or
start yeah that’s the question that
whether things need to change
Harvard Business School in the 80s is
where a lot of these ideas were
propagated trend the small generation of
business executives and Harvard Business
School the latest issue of the Harvard
Business Review was starting to ask well
you know do we need a new model in my
reporting I met another famous business
professor of contemporary building
treatments as names Mike Jensen and he
wrote a very famous paper in the 1970s
the Mike Jensen argued that the job of
the CEO is to serve the best interests
of the shareholder and I got to
interview him in person
and he said you know I think it’s not
overboard now he mentioned it’s a story
that’s been in the news about the drug
company that bought another big drug
company and all it did was the juices
come out now is that throw company
jacked up all the prices for the
patients which is great for revenue in
great for a stock price not so good for
the patients and Mike Jensen when it is
really interested you know I don’t think
sure well there should be at the center
anymore so there’s no big thing there’s
the more change that’s kind of happening
with corporations what they should do
kinda at the center of capitalism that
modern capitalist so I encourage you to
kind of follow it and join this
conversation of what are corporations
for which brings me back finally to the
Chicago Cubs so bill 20 this young man
who sued the company in 1966 he went to
court and he lost of course said you
know the arugula corporation doesn’t
necessarily have to mess with you to
this investor especially Little Italy
investment in college years but in the
end those when he saw because kind of
listened to him one of the twenty years
later they installed lights at Wrigley
Field in late eighties and of course
last year they won the World Series and
I got to speak to Bill I see he’s still
around is in his 80s now this original
Liggins and he said in the end they won
the World Series
in my case turned out to me
thank you very much
[Applause]
[Music]
[Music]
you
in 1966 there was a young man who loved
the Chicago Cubs he loved him so much
he sued them see the Chicago Cubs had a
problem they were losers and this young
fan said I know why they’re losing said
the Cubs don’t have lights at their
field at Wrigley Field and he had some
data and he said you know every time the
Cubs would play at home and their eyes
would get used to playing in the middle
of the day they’re going on the road to
New York as st. Louis they lost and they
lost a lot so he said I’m a shareholder
of the company his grandfather had given
him a couple shares of the company the
Wrigley company and he sued as a
shareholder he said you know I own part
of this company you have to listen to me
so why am I telling you this well
underneath all of this is a really
important question a fundamental
question for all of us and that is who
does the corporation work for does it
work for the shareholders does that work
for employees does it work for customers
does it work for the executives I mean
this isn’t some arcane kind of business
II think this is about employers and
workers this is about you and me so the
program I work for marketplace public
radio we reported this series on this
question and I want to tell you what I
learned most important I want to tell
you what I got wrong the assumptions
that I had proven wrong in the course of
my reporting see I wish thought that the
shareholders were first that maximizing
shareholder value was the job of
corporations in America it turns out
that hasn’t always been the case
employees I thought employees were
always last in line but that wasn’t
always the kiss it actually changed in
the course of my lifetime
it just wasn’t paying attention so I
grew up in the awful 70s and the Kipp C
New York middle of nowhere New York my
dad worked for IBM the only thing I
remember about that time was going to
country club it was a free perk for
every employee who worked for IBM he
could bring your spouse or family and so
we were there all the time me and my big
brother and my parents and we went to
the pool there actually was the pools
there were two pools my big brother went
to the bigger the bigger Olympic sized
pool of the diving boards and I was with
the younger kids at the smaller pool
temperature was curiously warmer in the
water there you know the story and that
well not the pool part but the Country
Club part was a picture of Corporate
America in the post-war years and then
the benevolent company it took care of
the whole family from Monday to Sunday
from womb to tomb as some people put it
if you got sick the company gave you
insurance when you retired their company
did your pension and IBM it also gave
you a watch and that was which is kind
of how corporations work the corporation
was the organizing unit of society in
post-war America those are the words of
a business professor named Jerry Davis
at the University of Michigan right left
revolved around the corporation and I’m
going to show you something this is the
General Electric Company in 1953 it put
out a tally of where the money of the
company goes and it kind of showed the
importance of where they put their money
so after paying the government their
passes and after paying suppliers 36
cents of every dollar that came in went
to the workers fair for the money went
to their workers one cent of each dollar
went to research and what was left over
the last three point nine cents that
year went to the shareholders so the
people who owned stock in the company
were explicitly last in line at the time
employers were workers were first in
line and the stockholders were last in
line and it wasn’t just GE wasn’t just
IBM this was stated explicitly in one
way or another at companies like Kodak
coca-cola General Motors it’s just kind
of how how it was this is this was kind
of a belief system where companies
didn’t have to do this in fact
historically companies did a lot of
public things that were beyond their
narrow self-interest back in the day
come
build canals that built roads if you go
all the way back to 1600 in the East
India Company they coined currency they
ran ports so companies were had these
public purposes and they didn’t have to
do it it was basically a belief system
that’s what I learned in the course of
my reporting basically a fad it didn’t
have to do this and over long periods of
time sometimes fads change right they go
out of fashion so I’m in 20 here wearing
blue pants and brown shoes it’s kind of
a thing now and I’m quite certain that
before long it’s not going to be a thing
anymore right my daughter’s gonna say
dad what were you thinking all right
it seemed a good idea at the time in
corporate America that seemed like a
good idea at the time was this panel a
benevolent corporation with employees
first in line and then it started to
change in the 70s because the
gold-plated American corporation started
fall apart our competition from Germany
and Japan started coming from overseas
great industrial companies and our
factories started to close or shut down
and the employees started to lose their
jobs and some of these have kinds of
problems as you’ve read or you remember
we had inflation we had a stagnant
economy we had had big economic slump
also back down a lot of people talk
about stagnation another word that
didn’t take as much was in slump at the
time you know but but in technical terms
the 70s economically they sucked it was
it was a really bad time and so the
great American thinkers of the economy
has started saying well maybe a new
gospel of how corporations should do
that gospel was the free
economy and one of the early preachers
was a man named Milton Friedman before
the year before in 1970 Milton Friedman
economist at the University of Chicago a
very thanks article in The New York
Times Magazine
misson the job the corporation is just
is to make money it’s not to do all
these other things he said corporations
don’t have soul they’re their artificial
corporation it’s an artificial person he
said so what job is not to reduce
pollution its job is not to reduce
inequality no its main job those things
he said are pure socialism in 1970 he
said the job the corporation is simply
to make money for the shareholders
they’re the ones who put their money
into the company and if you use the
money for anything else you’re wasting
these people’s life and so this was kind
of a building block of this new church
of the free market and other preachers
of this idea started coming on board
Ronald Reagan in the 80s the British
Prime Minister Margaret Thatcher was one
of these creatures as well and so
suddenly it became the new buddy system
right this was not something where the
came down from the mountain and people
so this is how it has to be nobody has
to bill say this has to be it was just a
fad it was it was blue pants and brown
shoes and suddenly we all started to to
my internist this notion of market
thinking got into all of our vocabulary
and we’re going to hear it today I use
it all the times of it so instead of
learning I talked about expanding my
human capital using economic insurance
right and my net worth of social capital
formerly known as for friends this is a
true story about a week ago I caught
myself I was trying to decide whether to
eat a cupcake in the middle of the night
and I thought myself doing a
cost-benefit analysis okay so something
else economic mumbo-jumbo has become
English and that’s kind of always become
down and so at companies like General
Electric what we found was a lot of the
money because of this obsession with
shareholders a lot of money no longer
went to the workers a lot of the money
went to the shareholders because we all
started buying into this and we all
started kind of joining this this church
because it really changed the economy of
the nineteen eighties yes ninety took
off like on this group stock markets in
the 80s and 90s it expanded 12 times in
corporate life really started to change
what happened to us a lot of the
companies started to buy one another you
maybe remember this if you were around
them these billionaire investors where
borrowed billions more money to take
over entire companies so if you
remember that timer or to show off their
friends you talk about the leverage my
house the hospital takeovers at the time
work better yet you can refer to the
movie Wall Street from 1987 know a lot
of you work may not have been around in
1987 but the main scene there was
starring Michael Douglas and he was the
soleus investor guy on Wall Street a
slick back hair and a suit with
suspenders above fats right and he was
that meeting with all these shareholders
at a company called tilt our paper we
still had paper in 1987 and and investor
hold a meeting he talked to these other
shareholders our economists said you
know all these vice presidents here
about wisdom are you might know you
needed to change the company to take
over this company and if you act in your
self-interest everything’s going to work
out and the money quote from the movie
is when Michael Douglas’s greed is good
greed is right greed works spoken like a
true shareholder sitting in the first
pew right at the Church of the free
market and that’s how a lot of the the
economy changed for us shareholders were
first in line so the question is or
where the workers in all this and less
than they’ve changed for us because our
job security really went out the window
our pension is not so much and and we
started to really struggle as the
American worker so the small corporate
social contract that you develop in
post-war America start
there’s a lot in country club model it
didn’t really it didn’t really exist
anything you might think okay maybe this
is just how things have to be maybe
corporations had to do this to survive
and this is just a bizarre but it turns
out my critics said this model went
overboard and they’re really asking the
question is we need to change this model
and as they see it this model this
perhaps obsession with stockholders and
stock price has resulted in a bunch of
disasters that we’ve seen not too long
ago disasters like the Enron scandal the
decayed oil spill the financial crisis
of 2007 in 2008 and they say another big
trade off of where we are today
is innovation back in the day patient
capital investing your company money
into research for long periods of time
delivered the railroads delivered
electricity from their country the
internet breakthrough drugs and who’s
going to do that anymore
that’s the question if you’re spending
all your money or largely focused on
investors in the stock price was going
to do that anymore so some of the early
evangelist of this of this new church or
start yeah that’s the question that
whether things need to change
Harvard Business School in the 80s is
where a lot of these ideas were
propagated trend the small generation of
business executives and Harvard Business
School the latest issue of the Harvard
Business Review was starting to ask well
you know do we need a new model in my
reporting I met another famous business
professor of contemporary building
treatments as names Mike Jensen and he
wrote a very famous paper in the 1970s
the Mike Jensen argued that the job of
the CEO is to serve the best interests
of the shareholder and I got to
interview him in person
and he said you know I think it’s not
overboard now he mentioned it’s a story
that’s been in the news about the drug
company that bought another big drug
company and all it did was the juices
come out now is that throw company
jacked up all the prices for the
patients which is great for revenue in
great for a stock price not so good for
the patients and Mike Jensen when it is
really interested you know I don’t think
sure well there should be at the center
anymore so there’s no big thing there’s
the more change that’s kind of happening
with corporations what they should do
kinda at the center of capitalism that
modern capitalist so I encourage you to
kind of follow it and join this
conversation of what are corporations
for which brings me back finally to the
Chicago Cubs so bill 20 this young man
who sued the company in 1966 he went to
court and he lost of course said you
know the arugula corporation doesn’t
necessarily have to mess with you to
this investor especially Little Italy
investment in college years but in the
end those when he saw because kind of
listened to him one of the twenty years
later they installed lights at Wrigley
Field in late eighties and of course
last year they won the World Series and
I got to speak to Bill I see he’s still
around is in his 80s now this original
Liggins and he said in the end they won
the World Series
in my case turned out to me
thank you very much
[Applause]
[Music]
[Music]
you
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