Tuesday, January 26, 2010

Why how your company thinks is important - the need for governance change

Some thoughts on Citizens United v. Federal Election Commission

I have been all but floaded with posts and tweets on the above subject in the past few hours. It is an interesting issue, hotly debated in the United States, and it covers two issues, that I have first discussed in Robert Paterson's blog:
- How you treat corporations from a legal standpoint : treating corporations as legal persons (see corporate personhood) would almost naturally bring you to the decision taken by the Supreme Court;
- How corporations think and act internally, given the (overlooked) fact that they are legal persons that employ scores of natural persons, and yet, are not democracies. 

I discussed in my latest post why it was important to change the way a corporation thinks, using the OS analogy. The basic idea was that the increasing complexity of the economic, social and technological environment stretches the limits of the corporation's old industrial OS (taylorism, hierarchy, monolitic culture), and that social technologies provide an opportunity to reengineer this OS. 

If I push this idea a bit further (which is anyway where I want to go), what we also see is that, by working on ideas more than on products (intangible assets more than on tangible assets), corporations are slowly but firmly changing the human dimension they target. Let me be clear : industrial corporations helped increase the general well-being by developping utilities, infrastructures, basic products and services and (even though this is also often overlooked) by making hunger (in industrial countries) a sad exception. Corporations in the now-ending knowledge economy increased the part of intangibles in their operations.

I think this is fundamentally changing. Today, as most markets are mature and saturated (who would want to market cars, today ?), companies will compete for a share of attention, which is also a share of mind, of talent, of influence of each one of us. The human dimension that some of these new type corporations target is not physical well-being nor general consumption but values, beliefs, meaning. It's having all information flowing freely in the world within a "do no evil" philosophy; it's providing the people a technology so that they can invent new usages (see what Umair Haque has to say about ideals beating strategy in the 21st century).

So we have some corporations working on the very fabrics of society. And, oh, by the way, banks have taken on the business of creating money (and then using it to pay themselves bonus, that they can use in the real economy).

Another point. I will not speak here of SMEs, entrepreneurs or your average Mom & Pop business. Some corporations, though, are huge. Really impressive. I think McKinsey published something on mega-corporations being a key trend for this century. I do believe that is true. Some corporations are really too big to fail (from a social point of view). 

It is because such corporations have been given the legal person status that we have an issue to think about. Such corporations, today, try to have an influence on the landscape they compete in (business is business) and, with this Supreme Court decision, they have no real limit on what they can do.

Here, what we basically have then, are social structures (huge corporations ARE social structures) with influence in government affairs that are NOT democracies. Given the power that corporations will be gaining in the coming decades, when they work on ideals and attention, this will be entirely different from having industrial conglomerates that can lobby for the price of raw materials ... These corporations already behave as small societies, and some have for years already replaced the state or society for basic public services such as health, insurance, ...

I might be pushing this, but how different is this from having one of the 50 states not being a democracy ?

So, my opinion on all this ? Having corporations being able to influence political life is a real issue and I quite agree with people thinking about constructive capitalism, or with people trying to bring new, more collaborative ways and structures into the corporation. It's what I do. I also think the court decision did not really delve into what a corporation really is.

And that is what we need to think about now. I feel it is high time corporations governance included some references to democracy in the way key orientations are taken.  Once they reach a certain size, I certainly do not see why they should be governed by shareholders. And that seems a really tough political question to tackle

1 comment:

  1. For corporation as a person, you can watch "The Corporation" (The film is based on the book The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan).