5 mins

Does capitalism need saving from itself?

By Steve Cook

new-york-featured-col

This excellent and balanced piece was first published on 6th September 2019 – which feels like a lifetime ago in this debate (and much else). My head is trying to remain impartial but my heart has a very strong preference. Is there common ground in what shareholders and stakeholders see as valuable? #VcommoncauseNOW #VsocialvalueNOW #VbravenewworldNOW

By Gillian Tett | FT.com

Gillian Tett on why bosses are buying into the idea of a purpose beyond profit.

Marty Lipton does not have the look of an American revolutionary. At the age of 88, he is seldom seen without a carefully pressed suit and dapper tie.

His resume reeks of Wall Street power. In 1965 he co-founded Wachtell, Lipton, Rosen & Katz, one of the most prestigious and lucrative American corporate law groups, and he is famous for having invented, in 1982, the “poison pill” — a legal mechanism used by company boards to prevent takeovers.

“I believe in capitalism. I believe in our [financial] system,” Lipton tells me over lunch in the Rockefeller Center Club, an elite venue on the 65th floor of the Rockefeller Center, where Manhattan power brokers can dine while peering down on the teeming city below.

But it is from elevated perches such as this that Lipton has been waging a decades-long battle with parts of America’s establishment. The reason is a paper he wrote in 1979 called “Takeover Bids in the Target’s Boardroom”, which floated a then-revolutionary idea: that corporate leaders and investors should stop focusing on short-term shareholder returns and instead chase long-term value for “stakeholders” such as employees, clients and communities.

In continental Europe or Japan, which have long embraced a more stakeholder-focused model of capitalism, Lipton’s idea might not have seemed so controversial. Yet in the US his paper provoked trenchant attacks from other lawyers, academics and investors. “Nobody wanted to listen,” Lipton chuckles over the Rockefeller silverware.

But history can move in unexpected ways. Last month, 181 American chief executives issued a collective “statement on the purpose of a corporation” that abandoned their long adherence to shareholder primacy. Instead, the group — which was organised by the Business Roundtable under the leadership of Jamie Dimon, head of JPMorgan — pledged “a fundamental commitment to all our stakeholders”…

READ THE FULL ARTICLE HERE

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