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Shaping the New Values of Capitalism

Fredrik AttingPierre E. CohadeYoshito Hori
Tunku Badlishah
Moderated by • Robert Greenhill

Thursday 18 June

In recent decades, divergent modes of capitalism – based on different models of growth, ownership structures, incentive systems and regulatory approaches – have emerged in geographies around the world. But the global economic crisis has called certain shared elements of the existing capitalist system into question. The panellists were asked to identify some of the fundamental flaws in the system and suggest what values ought to underpin capitalism in the wake of the crisis. While they sounded no calls for a radical transformation of the system, they did highlight lessons to be drawn from the crisis and offered specific prescriptions, from the perspective of regulation and corporate governance and not just values, on how capitalism might be reshaped into something more sustainable.

Key points

• Capitalism is alive, if not alive and well, panellists agreed. As the only viable economic system, it will survive the downturn – albeit in a profoundly different form.

• Corporations need to recognize that their shareholders are not their only stakeholders. They need to shift their emphasis from simply delivering shareholder value to also fulfilling their role as employers, community members and taxpayers. And they need to recognize that they are part of a value chain that includes their suppliers and customers.

• Management decisions based on coldly rational, data-driven financial models are narrow and myopic. “A management with conscience” should supplant the all-too-common, bottom-line obsessed management style. Decisions need to be made in a more holistic fashion that will better serve to attract and retain the best talent, satisfy customers and maintain market share.

• The role of corporate boards of directors, which are supposed to approve executive pay among other responsibilities, has too often been compromised, with chief executives commonly taking on the role of board chairpersons. These roles need to be kept separate, lest the chief executive fill the board with his or her own cronies.

• Panellists agreed that wage differential-based executive compensation caps, based on some multiple of lowest employee pay, will become more commonplace. However, given existing disparities between wages from country to country, no standard multiple is practicable, and caps will likely be determined in individual labour markets.

• Corporate social responsibility (CSR) and clear corporate strategies on sustainability and environmental impact will not be mere trappings for public relations gain, but will become de rigueur and increasingly demanded by stakeholders. Companies with the foresight to implement these policies will be long-term winners – just as Toyota and Honda, with their early move into hybrid automobiles, have reaped rewards.

• Revamped rules and tightened regulatory oversight are not of themselves sufficient to lend longevity to capitalism. An embrace of ethics, rooted in the ethical or religious traditions that exist in all geographies, needs to be incorporated into company culture, especially at the executive level.



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