Survival (Not Stakeholders) is the Name of the Game
CEOs are pressured by many different parties who have an interest in the success of the company. These interests, however, [...]
October 13 2011 by ChiefExecutive.net
CEOs are pressured by many different parties who have an interest in the success of the company. These interests, however, don’t always have the same goals. Who should the CEO listen to? Should he put short-term goals and dividends in front of long-term goals that might ultimately help the success of the company, but won’t provide shareholders instant profits?
The answer, according to an article in The Harvard Business Review, is to prioritize the corporation. Corporate survivalism puts the CEO’s focus on the corporate entity itself rather than the competing interests that might hinder the long-term survival of the corporation. Author Michael Raynor says:
In practical terms, what this means is that management should not seek to maximize the wealth of any one of its major constituencies — customers, investors, employees, and society (in the form of obligations to governments). Employees provide human capital, customers provide revenue and social capital, governments provide critical infrastructure (not just “pipes and schools” but most fundamentally the rule of law) and legitimacy, and shareholders provide financial capital. None comes first in line; none is even primus inter pares. Rather, corporate leaders should seek to pay each supplier what is necessary in order to secure the requisite inputs, and no more.
While this is a thorough and logical answer, is it practical? Especially in times when CEO tenure can be short (e.g., HP’s Leo Apotheker was ousted after 11 months in the top spot), can CEOs afford to take this view of corporate survivalism and still have a long¬ tenure at a company? Let us know your thoughts in the comment section below.