Dan Bigman

Dan Bigman
Dan Bigman is Editor and Chief Content Officer of Chief Executive Group, publishers of Chief Executive, Corporate Board Member, ChiefExecutive.net and Boardmember.com. Previously he was Managing Editor at Forbes and the founding business editor of NYTimes.com.

Dear Sen. Warren: Respond to Her Letter to CEOs

[caption id="attachment_69754" align="aligncenter" width="696"] U.S. Senator Elizabeth Warren (D-MA) REUTERS/Brian Snyder[/caption] We all knew this was coming. In response to The Business Roundtable's recent "Statement on the Purpose of a Corporation," presidential hopeful Sen. Elizabeth Warren fired off letters to the BRT's biggest names this week asking them "for information about the tangible actions you intend to take to implement the principles" that they outlined in the note. How best to demonstrate their intentions are true? By signing up for her "Accountable Capitalism Act," of course. If you haven't seen her plan, it's out-there enough to garner headlines even amid all the other Washington chaos, demanding, among other things, that large American companies obtain "charters" from the federal government to operate, turn 40 percent of their board seats over to worker representatives and require shareholder approval for all political expenditures. In the interest of fairness, we've republished her letter below. So now that you've heard from her, we'd like her to hear from you—the tens of thousands of other American CEOs who don't receive letters from presidential hopefuls (except when those hopefuls are looking for a contribution, of course). What's your take on Sen. Warren's proposal? What do you say in response? We'd love to hear from you—and will publish the best submissions on Chief Executive. Drop us a line at contact@chiefexecutive.net
Sen. Warren's Letter to Business Roundtable CEOs October 3, 2019 Jamie Dimon Chairman and Chief Executive Officer JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017 Dear Mr. Dimon: I write in regard to the Business Roundtable's (BRT) new Statement on the Purpose of a Corporation issued on August 19, 2019. 1 This new statement marked a potentially significant change. It reversed the Business Roundtable's troubling position, held since 1997, that "corporations exist principally to serve shareholders,"2 3 instead acknowledging that "each of [y]our stakeholders is essential" and committing to "deliver value to all of them, for the future success of our companies, our communities and our country."4 You signed the pledge to follow these principles on behalf of JPMorgan Chase. I write for information about the tangible actions you intend to take to implement the principles, including whether, to make good on your commitment, you will implement the steps laid out in the Accountable Capitalism Act I plan to reintroduce in the coming weeks. For most of our country's history, as corporations succeeded, corporate profits and wages for working families all rose together. In the early 1980s, less than half of the corporate profits from America's biggest companies went to shareholders, but now, as a result of decisions to boost share prices at the expense of workers, consumers, and other stakeholders, more than 90 percent of profits go to shareholders, representing a shift of trillions of dollars.5 6 In 2015 alone, American companies paid about $1 trillion back to investors in the form of buybacks and dividends, even as wages and other investments stayed flat or decreased.7 While corporate profits soared and more money flowed upwards, American workers were left behind, producing more wealth for their employers while these companies refused to invest in them. I am pleased that the Business Roundtable has acknowledged the harm that this trend inflicts on the economy and that you, on behalf of JPMorgan Chase, have pledged to take steps to reverse it. But commitments are hollow if they are not accompanied by tangible action that provides real benefits to workers and other stakeholders. The Accountable Capitalism Act, which I will reintroduce in the coming weeks, operationalizes the commitments you made to balance the interests of shareholders with other stakeholders, such as employees, customers, and community members. This approach is derived from the thriving benefit corporation model that 35 states and the District of Columbia have adopted - and that companies like Patagonia and Kickstarter have embraced - with beneficial results.8 9 My Accountable Capitalism Act would: Require very large American corporations to obtain a federal charter. Directors of these new companies, known as "United States corporations," would be obligated to consider the interests of all corporate stakeholders. This is consistent with your commitment to, "delivering value to [your] customers," "dealing fairly with [your] suppliers," and "supporting the communities in which [you] work." Require that worker representatives comprise 40 percent of board directors to ensure that workers have a meaningful say in substantial decisions made by corporations. Worker representation on corporate boards is associated with higher income equality, less offshoring, more capital investment, greater innovation, and stronger shareholder returns. 10 
11 12 13 14 15 In the five largest European countries with worker representation on private company boards, wages and benefits outpaced those in the United States in recent years, 16 17 18 19 and this co-determination model has helped reduce income inequality while still producing strong growth and reducing outsourcing.20 My bill would build on these successful approaches and give American workers a seat at the table deciding how American corporations are run. These tangible actions could allow you to fulfill your commitment to "investing in [your] employees" in ways that actually have substantial input from those employees. Restrict sales of company shares by the directors and officers. These protections eliminate the perverse incentives that let cororate executives boost their own pay and funnel money to shareholders through financial engineering tricks that ultimately do not benefit the company at-large and the workers who have been left behind. Because their compensation often includes stock, corporate managers have huge incentives to promote shareholder returns above all else, one reason why the average CEO of a big company makes more than 360 times more than their average worker. Require United States corporations to obtain shareholder and board approval for all political expenditures. In order to ensure that businesses truly take stakeholder interests into account, my legislation would require large corporations to obtain broad support across shareholders, management, and workers before making any political expenditures. For too long, corporate executives have been spending on elections without restraint. If each of 
ur stakeholders are truly essential, then corporations should not be able to make political contributions in the name of the business without the input of workers. This requirement would help operationalize your commitment to "[generate] long-term value for shareholders" and to "transparency and effective engagement with shareholders." If you, and the other 181 corporate executives who signed the BRT's new Statement on the Purpose of a Corporation, plan to live up to the promises you made, I expect that you will endorse and wholeheartedly support the reforms laid out in the Accountable Capitalism Act to meet the principles you endorse. I have attached a copy of the bill. In order to better understand whether you intend to make good on your commitment, I ask that you respond in writing about whether you support the Accountable Capitalism Act and answer the following questions no later than Friday, October 25, 2019.
  1. The Statement on the Purpose ofa Corporation that you signed stated that you share a fundamental commitment to all ofyour stakeholders and made a number of commitments, stating that you "commit to deliver value to all of them, for the future success of [your] companies, our communities and our country."21
  • You have committed to "[d]elivering value to [your] customers" and that you "will further the tradition of American companies leading the way in meeting or exceeding customer expectations."22 Please describe concrete steps that your company is taking to meet these commitments and any changes in company plans, policies, or procedures that have resulted from this commitment.
  • You have committed to "[i]nvesting in [your] employees," starting with "compensating them fairly and providing important benefits" and "supporting them through training and education that help develop new skills for a rapidly changing world."23 Please describe concrete steps that your company is taking to meet these commitments and any changes in company plans, policies, or procedures that have resulted from this commitment.
  • You have committed to "dealing fairly and ethically with [your suppliers]" and "serving as good partners to the other companies, large and small, that help [you] meet [your] missions."24 Please describe concrete steps that your company is taking to meet these commitments and any changes in company plans, policies, or procedures that have resulted from this commitment.
You have committed to "supporting the communities in which [you] work" and stated that you "respect the people in [your] communities and protect the 
environment by embracing sustainable practices across [your] businesses."25 Please describe concrete steps that your company is taking to meet these commitments and any changes in company plans, policies, or procedures that have resulted from this commitment.
  1. You have committed to "generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate" and stated that you are "committed to transparency and effective engagement with shareholders."26 Please describe concrete steps that your company is taking to meet these commitments and any changes in company plans, policies, or procedures that have resulted from this commitment.
Sincerely, Elizabeth Warren United States Senator
Footnotes: 1 Business Roundtable, "Business Roundtable Redefines the Purpose of a Corporation to Promote 'An Economy That Serves All Americans," August 19, 2019, https://www.businessroundtable.org/business-roundtable-redefines- the-purpose-of-a-corporation-to-promote-an-economy-that-serves-al l-americans. 2 !d. 3 Business Roundtable, "Statement on Corporate Governance," September 1997, http://www.ralphgomory.com/wp- content/uploads/2018/05/Business-Roundtable-1997.pdf.
4 Business Roundtable, "Business Roundtable Redefines the Purpose of a Corporation to Promote 'An Economy That Serves All Americans," August 19, 2019, https://www.businessroundtable.org/business-roundtable-redefines- the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans. 5 Brookings Institute, "Stock buybacks: From retain-and-reinvest to downsize-and-distribute," William Lazonick, April 2015, https://www.brookings.edu/wp-content/uploads/20 16/06/lazonick.pdf.
6 The Hill, "Congress can tum the Republican tax cuts into new middle-class jobs," Opinion, William Lazonick, February 7, 2018, https://thehill.com/opinion/finance/372760-congress-can-tum-the-republican-tax-cuts-into-new- middl e-c lass-jobs. 7 "Makers and Takers", Rana Foroohar, Crown Business, New York~ 2017, p. 71 8 Patagonia, "Annual Benefit Corporation Report Fiscal Year 2018," Accessed September 21,2019, https://www.patagonia.com/static/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw08dOf6ed!PDF- US/20 l8-B-CorpRepo.rt-050919.pdf.
9 Kickstarter, "Kickstarter PBC 2017 Benefit Statement," Accessed September 21, 2019, https://d3mlfyygrfdi2i.cloudfront.net/181119 PBC Report PDF Master.pdf.
10 Social Europe, "Europe Needs a Pay Rise and Europeans Want Good Jobs," Steve Coulter, April 18, 2018, https://www.socialeurope.eu/europe-needs-a-pay-rise-and-europeans-want-good-jobs. Growth in labor compensation across all occupations in the five largest European nations with codetermination for private companies (France, Germany, Netherlands, Norway, and Sweden) between 2010 and 2017 averaged 7.3 percent after inflation
  • Handelsblatt, "Expansion ins Ausland sichert Jobs in der Heimat," http://handelsblatt.com/unternehmen/mittelstand/wachstumsmaerkte/globalisierung-in-dax-konzernen- expansion-ins-ausland-sichert-jobs-in-der-heimat/14696124.htm1. The largest German firms habitually increase both domestic employment and employment abroad. 
I2 Journal of Financial Economics, "Does Good Corporate Governance Include Employee Representation? Evidence from German Corporate boards," Larry Fauver and Michael Fuerst, December 2006. http://citeseerx.ist.psu.edu/viewdoc/download?doi=l0.1.1.689.9934&rep=repl&type=pdf.
IJ Eurostat, "Business profit share and investment rate higher in the EU than in the USA," Denis Leythienne and Tatjana Smokova, April 2009, https://ec.europa.eu/eurostat/documents/3433488/5280941 /KS-SF-09-028- EN.PDF/84273e80-a461-479a-958b-37216b 1bde30?version= 1.0. Non-financial firms in the European Union, where co-determination is common, invest at a rate that is 39 percent greater than at comparable American returns. 
I4 Mittbestimmungs-Portal, "Weo Arbeitnehmer Mitbestimmen, Wird Mehr Investiert," Bockler Impuls, June 27, 2016, https://www .mitbestimmung.de/html/wo-arbeitnehmer-mitbestimmen-wird-mehr-5004.htm1.
Is Cambridge Journal of Economics, "Co-determination and innovation," Komelius Kraft, Jorg Stank, and Ralf Dewenter, January 2011, pp. 145-172, https://academic.oup.com/cje/article-abstract/35/1/145/1730110. 
I6 ETUI, "Board-level Representation," Accessed October 2, 2019, http://www.worker-participation.eu/National- lndustrial-Relations/Across-Europe/Board-level-Representation2.
17 Eurostat, "EU population up to almost 512 million at 1 January 2017," July 10,2017, https://ec.europa.eu/eurostat/documents/2995521 /8102195/3-1 0072017-AP-EN.pdf/a61ce lea-l efd-41 df-86a2- bb495daabdab. 
IS Social Europe, "Europe Needs a Pay Rise and Europeans Want Good Jobs," Steve Coulter, April18, 2018, https://www.socialeurope.eu/europe-needs-a-pay-rise-and-europeans-want-good-jobs. Growth in labor compensation across all occupations in the five largest European nations with codetermination for private companies (France, Germany, Netherlands, Norway, and Sweden) between 2010 and 2017 averaged 7.3 percent after inflation. 19 Bureau of Labor Statistics, "Employment Cost Index," July 2019, https://www.bls.gov/web/eci/ecconstnaics.txt. 
20 While offshoring was a major factor in the net loss of American manufacturing jobs since 2000, German firms have increased both their domestic and international employment while maintaining positive innovation and shareholder returns. 
21 Jd 22 ld 23 Jd 24 Jd

Biden Tops Trump Decisively In Straw Poll of Big-Company CEOs, Who...

Joe Biden topped Donald Trump in a straw poll of voting preferences among 72 prominent CEOs taken yesterday in Washington, with Sen. Elizabeth Warren a distant third.

Bad News? Four Points Of Optimism About The Economy

We've reached 10 years of economic expansion and yet, many CEOs seem to be anxious. The biggest worry rhymes with Smariffs, but that’s hardly the only concern. Amid this darkening mood, Chief Executive Editor-in-Chief Dan Bigman shares a few reasons to be optimistic.

SEC Pushes Back On Power of Proxy Advisors

In a move seen to be the first in a series of steps to curtail the power of proxy advisory firms, the SEC today reiterated its stance that providing advice on voting is “solicitation” under federal law and will be governed by stringent anti-fraud rules.

Early Facebook Investor Roger McNamee: FTC Settlement Not Enough

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Our Next Moonshot? It Should Be Fusion

[caption id="attachment_69315" align="alignnone" width="696"]fusion reactor ITER july 2019 Construction continues at ITER in southern France, where 35 nations—including China, the European Union, India, Japan, Korea, Russia and the United States—are working to build the first fusion reactor.[/caption] In 1961, as NASA was trying to spec out the computer needs for taking a man to the moon, there was only one commercial supplier for computers that could do the needed real-time calculations—IBM—and the only machines that could do them filled an entire room. By 1969—just eight years later—the computer that took Apollo 11 to the moon and back fit in about one cubic foot of space, weighed less than 100 pounds and featured pioneering integrated circuits from Fairchild Semiconductor that didn’t exist five years earlier. The development of the Apollo computer, as retold in One Giant Leap, Charles Fishman’s great new history of the Apollo missions, was the moonshot within the moonshot. Funded by NASA and designed and prototyped at Charles Stark Draper’s legendary Instrumentation Lab at MIT, it is Apollo’s true legacy, ushering in not the Space Age but the Digital Age that has transformed human existence. With moonshots in mind, I sat down in June with another MIT visionary, Nicholas Negroponte, to talk about emerging technologies, from quantum computing and A.I. to augmenting people with both genetic and machine mutations. He founded the school’s vaunted Media Lab and has an uncanny ability to see the future long before it happens. What one technology would he pick for an all-out development effort by the United States? Negroponte didn’t blink. “Fusion,” he said. Fusion? “Absolutely.” Surprised? That’s understandable. Unlike the race to space during the Cold War, autonomous cars or who will roll out 5G, there’s zero mainstream attention being paid to the idea of forcing together hydrogen atoms to harness the limitless energy source that powers the stars. Nuclear fusion research—despite huge gains in recent years—isn’t going to make a presidential debate anytime soon, let alone garner Apollo-like funding. And that, says Negroponte, is a pity. Because no other technology would transform our lives in the same way fusion would. In an age where we quibble over how many solar panels you need to run a hair drier, this would upend everything. “Think for a moment if power were costless and limitless....What if we all used 20 times more power than we do on a per capita basis?” he says. “A different equation where power is infinite, it’s not polluting, you have no fuels that you need to replace.” To Negroponte, fusion isn’t about going green. It’s creating a new world based on unlimited energy consumption, filled with new kinds of machines, new businesses, new industries, new ways of being. Crazy? Hardly, says Negroponte. “I remember when we would say to each other, ‘Imagine when computing is free and memory is infinite’,” he says. It sounded dotty in the ’60s and ’70s, but now “we’re almost there.” So, will fusion happen, even with a zero chance of moonshot funding? Yes, he predicts. “It’s definitely going to happen in your life.” Wow. Now just imagine if we treated it like Apollo.

Marriott’s Arne Sorenson: 2019 CEO of the Year

Megadeals! Hacks! Strikes! Protests! Airbnb! In a very crazy time for Marriott International, CEO Arne Sorenson excels by focusing on his people—and sticking to his principles.

Amalgamated Life’s Paul Mallen On Making The Leap From CFO to...

When Paul Mallen stepped into the CEO role at The Amalgamated Family of Companies in February 2018, he felt well prepared for the top job thanks to fourteen years at the White Plains, NY-based life insurer, which has traditionally focused on selling to labor unions—but is now branching out to mid-sized companies. As CFO, he had a deep understanding of the company’s finances—but he’d also worked as the defacto COO as well, overseeing functions including IT, underwriting, insurance operations and facilities. He also had the advantage of solid, long-standing relationships with all the other senior managers in the leadership team who would now report to him. But still, being CEO is very different than being CFO. From reporting to a board, not a boss, at a $180 million (revs) private company to engaging with entirely new parts of the business—not to mention customers—Mallen’s had to expand and reshape his focus. Mallen shares his lessons with Chief Executive for anyone making the transition—and CEOs helping their CFO get ready for the top job. What follows is edited for length and clarity:

You came up on the finance side. What surprised you about being CEO?

One was having to work more closely with the board of directors, which I expected. I've worked with the board before in my CFO capacity, but now we're reporting directly to the board and it's not like reporting to a direct manager such as your CEO or others. They're not looking at you day to day. They're not in the office, they’re spread out throughout the country. Some of the other differences: I have to focus more on sales and marketing. As CFO, I always worked with the sales and marketing groups, but I didn't have to get into in depth how they market, how they sell and so forth. I had to gain a deeper understanding of the process with our sales executives. And with that we've come up with new strategies and approaches to enhance our growth going forward. There were certain operational areas of the company, that did not report to me, so I had to learn those more in depth. More direct involvement with customers, brokers and consultants, which I happen to like. I've been very lucky with the internal relationships here. When I was CFO, of course I had many peers, but then when I was promoted, they were all reporting to me.

That's a difficult transition sometimes.

It can be. I was very fortunate that the senior executives here supported the board decision to elect me CEO and they've been in the past year and a half extremely helpful. It's really gone a long way in helping our company succeed.

How have you fostered that?

Well, first of all, those relationships developed over many years and from working with them and I think it's gaining respect at that point, even though they may not have reported to me. It's respect for the work I've done, the way I've treated them, the team effort. A lot of that carries now into the executive meetings and the way I'm looking at the company. If there are issues or problems that have been bubbling, we always try to get to them early before they become difficult to manage. If one person has an issue, we're not looking for that individual to necessarily resolve it on their own. I'm always looking for a different point of view and disagreements. I'm not looking for yes answers. I'm looking for different viewpoints.

The insurance business is changing, you're looking to expand beyond your traditional labor base of customers. There are other really large players in your sector. On top of that, there's digital technology and the way it's transforming every industry. Can you talk a little bit about how you're triaging all this and how you're tackling some of those challenges?

That’s exactly what we're looking at right now. Our roots are in or in labor and now we're looking to grow beyond labor unions to include midsize employers nationally. How do we think about that? Well, serving labor is really no different than serving the needs of rank-and-file employees, including highly skilled workers serving mid-size companies. So we think that we know these people, we know how to service them, we understand their needs. And with that, we think we could be successful in selling our benefits, which is one of our growth areas. We understand the needs of mid-sized companies because we are one. Because of our size, because of the way we operate here, we can customize solutions. As far as the technology change, obviously it can be a great equalizer between big companies and small companies done right. But also, you have to be very careful about capital spending and making the right decisions. And there's just a lot that comes with it.

How are you tackling that?

We’re the smallest standalone “A” rated company in terms of capital. So we have to approach things very differently than larger carriers because we can't take flyers. If we make a mistake when we're investing in technology, if we're putting a lot of capital into it, we obviously have a big issue. Having said that there are real technology needs and…we're dealing with all the same cybersecurity issues that the larger carriers are. We spend a lot of time in terms of prioritizing where our needs are. We're looking at the markets. We're looking at Insuretech, we're looking at other ways. We can always find efficiencies.

Any advice for someone who's come up in finance who's moving into the CEO role from the finance side?

Someone moving into the CEO from the CFO role, whether it's internally or externally, you’ve got to start to make sure that you understand all the businesses that the company has and the operations so in effect, you're learning down in terms of the operations. Also, there were a lot of expectations in terms of reporting directly to the board of directors and being able to work that with that board, not just around board meetings, but throughout the year. I think CFOs always think ahead and are proactive. But as a CEO, you’ve really got to think ahead and keep thinking way out into the future, not just what's happening this year. A lot of times CFOs might be focused on current year results, but you've got to focus out into 2021 while we're in 2019.

Dual-Class Shares Are More Popular Than Ever. Do They Actually Juice...

[caption id="attachment_66209" align="alignnone" width="1138"]Mark Zuckerberg, CEO of Facebook He's a fan.[/caption] Some of the most prominent companies of our era use them, from Facebook and Alphabet to Berkshire Hathaway. So did seven of the 10 biggest IPOs this year, including Lyft, Pinterest and Levi Strauss. They’re dual-class shares, endowing those who hold them with super-voting abilities that effectively leave them in control of the company regardless of what outside investors do—and they’re more popular than ever. Overall, the number of companies going public using this type of share structure went from just 4% in 2009 to 14% in 2018. Some 7% of all Russell 3,000 companies now have this kind of structure, by ISS’s count, and almost 9% of non-S&P 1500 companies use them—nearly double the number using them in the S&P 500. Proponents argue they protect management against exactly the kind of short-termism so many in the good-governance crowd rail against, allowing companies to make the kind of long-term bets needed to really grow a business—especially one with unproven technology. Opponents say they’re flat-out undemocratic, undermining common shareholders—and capitalism itself. (For the record, I've long been in this second camp—especially when it comes to Facebook.) But do they work? Do they actually help companies perform better? It’s a great question—and the answer, according to a new study by proxy advisory firm Institutional Shareholder Services is, well, mixed. ISS found (perhaps unsurprisingly given that it’s ISS) that dual-class companies were much less likely than their one-share, one-vote peers to track some of ISS’s favored corporate-governance benchmarks. They had more CEO-related transactions (raising fears of conflicts of interest), fewer independent board chairs and were less likely to disclose their director evaluation process. Interestingly, ISS found the dual-class firms had more gender diversity in the C-Suite versus one-share, one-vote firms, but less gender diversity in the boardroom. But what about the most important, bottom-line question—do these kind of companies perform better financially? Using Economic Value Added methodology (EVA), which measures profitability after subtracting the full cost of capital, dual-class shares do outperform peers, on what’s known as EVA Margin, that is, EVA/Total Revenues. But dual-class share firms underperform when it comes to EVA Momentum, the rate of improvement in profitability over time. “The advantage that dual-class firms may have established appears to be eroding over time,” writes Kosmas Papadopoulos, managing editor at ISS Analytics. “This trend highlights the risk of stasis upon achieving a certain level of performance.” In other words, the company performance depends—as it does with any other kind of company—on the performance of those who control the company. With one big difference: If something goes wrong here, there's nothing anyone can do about it.

Secrets of Glassdoor’s Top CEOs of 2019…Revealed!

An exclusive analysis of Glassdoor’s Top CEO rankings for 2019 reveals a lot of things about what motivates employees—most of them totally unsurprising. And that Best Buy employees like discounts. We go inside the data.
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CEO Confidence Falls Again In May Amid COVID Crisis 

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CEO of the Year

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