Tribune. Capitalism is on the dock. The list of grievances is not new. Shareholders monopolize too much of the value created by companies. Employees benefit insufficiently from this value. Companies have a strong impact on the environment and do not commit enough to protect it …
These criticisms, it must be said, played a spurting role. But they have a bias. They often use a “zero-sum game” approach that presupposes that the wealth created by companies is finite. The higher the share captured by shareholders, the more that of other stakeholders will be reduced to the minimum.
In the “zero-sum game” approach, the interests between the different stakeholders cannot be reconciled. To increase the share of other stakeholders, it is imperative to reduce that of shareholders. But there is another approach to capitalism (Grow the Pie, Alex Edmans, Cambridge University Press, 2020).
The principle of obliquity
It starts from the premise that the value created by companies is not finite. The more value a company creates, the more all stakeholders will ultimately benefit. The real question is therefore not: how to better distribute the value created by companies? Rather, it would be: how to increase the creation of value by companies?
Paradoxically, the best way to create value is to aim for… another objective. This is the principle of obliquity (Obliquity, John Kay, Profile Books, 2011). This principle suggests that one is more likely to achieve a goal when not directly aiming at it. It is very general. He explains in particular that the happiest people are not those who seek happiness at all costs.
In the business world, it implies that the companies that create the most value for their shareholders are those that prioritize other stakeholders.
Value for the shareholder
The example of Boeing is well known. Bill Allen was CEO of Boeing until the late 1970s. The raison d’être of Boeing was then to “eat, breathe and sleep for aeronautics”. When asked by a non-executive board member what return on investment, in English return on investment (ROI), the 747 was supposed to generate, Bill Allen would have replied that the calculation had been made… but that no one remembered the result!
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