What–if any–responsibilities do corporations have beyond their bottom lines? This important question was debated today at the Center for American Progress by two distinguished experts from the business world.
Susan Lee, Vice-President for Economic Policy at the Center for American Progress, introduced the event. Leo Hindery Jr., Managing partner of Intermedia Partners VII, and Fred Smith Jr., President of the Competitive Enterprise Institute, debated the issue, moderated by The Wall Street Journal Assistant Managing Editor Alan Murray.
In framing the debate, Murray describes “something very important going on in the world of corporations.” Tracing what he terms “the age of the CEO” in the 1990s through 9/11 and more recent scandals, Murray points to a growing discussion of how the power of corporations should be used in society.
Hindery, himself a former CEO, believes that corporations must be interested in more than just maximizing returns to shareholders. Citing customers, employees, and the larger community as other important factors, Hindery seeks to expand the understanding of a corporation’s purpose to “a vibrant, prosperous middle class, growing from the bottom-up, best for corporate America, and certainly best for the country.”
According to Hindery, long-term success and profitability come from “being equally responsible to multiple constituencies,” and not just to investors. He supports a government role in developing those responsibilities because “corporations are simply incapable of self-policing.” Hindery also emphasizes, citing his personal experience, that creative and hard-working executives can successfully run socially responsible businesses.
Smith challenges the idea that generating wealth is the social role of corporations, and that they should focus on what they do best. He points out that “a profitable corporation does have to look at the world it operates in,” he argues that additional social policy considerations can interfere with good business. “It’s hard enough to run a corporation,” he believes, without expecting executives to compare dollar values and moral values.
In describing the role of corporations in society, Smith points to their success in focusing on specific areas and improving society through that narrow work. “It’s a good idea that we have specialized institutions,” and in specialized areas corporations are especially good at “expanding wealth and knowledge.” Expecting corporations to solve broad social problems might be expecting them to do too much.
Smith also emphasizes the need for business to better define the public debate about their role in society. “They haven’t adequately explained to the world what their role is,” he claims. “We need to teach the rest of us to enjoy capitalism.” In his view the misunderstood function of corporations has inhibited needed investment and made it more difficult to craft good government business policy.
Both debaters agree that businesses should be profitable, should be competitive and should follow the law. While Hindery says he believes there is room for corporations to have broader concerns, Smith says he thinks business needs to “get over its guilty feelings about itself.”
Leo J. Hindery Jr. is Managing Partner of InterMedia Partners VII, LLP, a media industry private equity firm and the successor to six previous InterMedia investment partnerships, the first of which Mr. Hindery founded in 1988. Until October 2004, Mr. Hindery was chairman, and until May 2004, CEO of The YES Network, the nation's premier regional sports network. He founded The YES Network in the summer of 2001 as the television home of the New York Yankees, winning five executive producer Emmys for outstanding programming. From December 1999 until January 2001, Mr. Hindery was chairman and CEO of GlobalCenter, Inc=, a major Internet services company, which was then merged into Exodus Communications, Inc. Until November 1999, Mr. Hindery was president and CEO of AT&T Broadband, which was formed out of the March 1999 merger with Tele-Communications, Inc. (TCI). In 1998, Mr. Hindery was named International Cable Executive of the year, and received the Foundation Award of the International Radio & Television Society, the Executive Achievement Award of the National Association of Minorities in Cable, the CTPAA President's Award for Outstanding Commitment to Public Affairs, and the Joel A. Berger Award for his leadership in AIDS and HIV initiatives. In 1999, Mr. Hindery was named Cable Television Operator of the Year, received the Distinguished Vanguard Award for Leadership from the National Cable Television Association, and was named by Business Week one of the "Top 25 Executives of the Year." Mr. Hindery graduated from Stanford University's Graduate School of Business in 1971, where he earned a Master of Business Administration degree. He is a graduate of Seattle University. Mr. Hindery has received honorary Doctor of Humane Letters degrees from Emerson College and the Rabbinical College of America. He is currently an executive-in-residence at Columbia Business School, and a member of the Board of Advisors of the Columbia School of Journalism.
Alan Murray is Assistant Managing Editor of The Wall Street Journal and author of the paper's "Business" column, which runs on page two every Wednesday. He is also a regular contributor to CNBC. Previously, Mr. Murray served as CNBC's Washington, D.C., bureau chief and was co-host of "Capital Report with Alan Murray and Gloria Borger." While working at CNBC, he also wrote the Journal's weekly "Political Capital" column. He spent a decade as the Washington bureau chief for The Wall Street Journal. Mr. Murray joined The Wall Street Journal in 1983 as a reporter covering economic policy. He was named Washington deputy bureau chief in January 1992 and became bureau chief in September 1993. During his tenure as bureau chief, the Washington bureau won three Pulitzer Prizes, as well as many other awards. Mr. Murray also is a regular panelist on Public Broadcasting Service's (PBS) "Washington Week in Review." He is the author of two best-selling books, titled The Wealth of Choices: How the New Economy Puts Power in Your Hands and Money in Your Pocket, published by Random House in 1991; and Showdown at Gucci Gulch: Lawmakers, Lobbyists and the Unlikely Triumph of Tax Reform, co-authored with Jeffrey Birnbaum and published by Random House in 1987. He earned a master's degree in Economics at the London School of Economics. In 2005, he completed the Stanford Executive Program at the Stanford Graduate School of Business.
Fred L. Smith Jr. is President and Founder of the Competitive Enterprise Institute, a free-market public policy group established in 1984. Mr. Smith combines intellectual and strategic analysis of complex policy issues ranging from the environment to corporate governance with an informative and entertaining presentation style. Well-known in academic and professional circles, Mr. Smith is a popular speaker at universities and conferences around the world. Mr. Smith is also a frequent guest on national television and radio programs, discussing and debating regulatory initiatives and topical policy issues. Providing both analytical and political insights, he has appeared on CNN's "Crossfire," PBS's "NewsHour with Jim Lehrer," "Now with Bill Moyers," ABC's "20/20," "This Week," National Public Radio's (NPR) "Talk of the Nation," and "The Diane Rehm Show," and "The G. Gordon Liddy Show," among many others. A prolific writer, Mr. Smith's works have been published in leading newspapers and magazines such as the Wall Street Journal, National Review, Economic Affairs, and the Washington Times. His academic articles have appeared in journals such as Harvard Journal of Law and Economics, CATO Journal, Economic Affairs, and as a contributing editor to Liberty Magazine . Mr. Smith holds a Bachelor of Science degree in Theoretical Mathematics and Political Science from Tulane University where he earned the Arts and Sciences Medal, Tulane's highest academic award, and was elected to Phi Beta Kappa. He has also done graduate work in Mathematics and Applied Mathematical Economics at Harvard University, SUNY at Buffalo, and the University of Pennsylvania.
Susan Lee is Vice President for Economic Policy at the Center for American Progress. Prior to joining the Center, Sue spent more than five years at McKinsey & Company, where she worked with a range of clients in the health care and nonprofit sectors, gaining expertise in a variety of strategy and management issues. Her experiences have included developing a set of Medicaid reform options for a governor, shaping a major foundation's investment strategy in K-12 education, and working with leaders of England's National Health Service to reform regulation of the hospital system. While attending law school, Sue worked with Attorney General Janet Reno, as well as at the law firm of Covington & Burling. She conducted research with Professor Elizabeth Warren on health-care affordability and with Professor Derek Bok on opportunity in America. In addition, she taught legal research and writing to first-year law students. Sue received her undergraduate degree from Harvard College, and her law degree from Harvard Law School. She is a member of the New York State Bar.