James A.F. Stoner and Frank M. Werner Schools of Business Fordham University

1. Re-creating the For-Profit CompanyExploring Alternative Organizational Designs for Global Sustainability James A.F. Stonerand Frank M. Werner Schools of Business Fordham University International Association of Jesuit Business Schools 15th World Forum – Jamshedpur, India 7-10 June 2009

2. AGENDA • Introductions • Premise • The company • Would you be interested in this company? • Why this type of company? • Now what?

3. About Frank • B.A. Physics and M.B.A. Harvard, Ph.D. Columbia • Former Associate Dean, GBA • Recipient – Gladys and Henry Crown Award for faculty excellence, 1985 and 2004; Stanley Fuchs Award for impact on students, 2008 • Chairholder – James A.F. Stoner Chair in Global Quality Leadership, 1993–1994 • Author – three textbooks, five research books, novel, book chapters, journal articles • Research – quality and finance, the goal of the firm, finance for global sustainability

4. About Jim • B.S. Engineering Antioch, S.M. and Ph.D. MIT • Recipient – Gladys and Henry Crown Award for faculty excellence in 1999, 2005 • Chairholder – James A.F. Stoner Chair in Global Quality Leadership, 2002–2006, Global Sustainability 2006-2012 • Author – five textbooks (many editions), ten research books, book chapters, journal articles • Research – 1960s: “risky shift,” 1970s: career plateaus, 1980s–1990s: world class managing, quality and finance, 2000s: managing for global sustainability

5. What is Global Sustainability? • Meeting this generation’s needs in ways that enhance the capacity of future generations to meet their needs (modified Brundtland Commission definition) • A world that works for everyone with no one left out

6. What is Global Sustainability? Use permitted by Creative Commons – GNU Free Documentation License

7. Premise • Companies operating under the constraints of the current business model may not be able to contribute enough to create a sustainable world • Alternative forms of for-profit companies might be able to make major contributions to world benefits, especially global sustainability

8. Developing the Concept • March 2006 – keynote address at a conference in Sri Lanka – by Jim • May 2006 – audio paper at Business as an Agent of World Benefits Conference, Case Western Reserve University, Cleveland, USA – by Jim and Frank

9. The Company – Purpose • Core spiritual value: “To contribute to a world that works for everyone with no one left out.” • The company explicitly renounces shareholder-wealth-maximization as a management goal and obligation although it is committed to making profits so it can sustain itself and can reward investors sufficiently to maintain their support.

10. The Company – Leadership and Executive Compensation • Four co-equal CEOs • good friends who love to work with each other • restricted from working > 45 hours per week • receive very modest compensation relative to today’s executive compensation practices • for a very large US or multinational company, TOTAL compensation per CEO might be about $1 million per year, including all perqs, retirement contributions, etc. • no performance bonuses • any “termination package” would not exceed one year’s total compensation

11. The Company – Leadership Style • Formally mandated as a blend of team-based “Level Five Leadership” (Collins, 2001) and “Servant Leadership” (Greenleaf, 1977) • the top management style is the “official leadership style” throughout the company • the co-equal CEOs make key decisions by consensus • any one of them can make immediate decisions if a crisis requiring instantaneous action occurs

12. The Company – Leadership Style • all company members are compensated well enough to have a comfortable life style and retirement – but “obscene” levels of compensation are ruled out • leaders and employees at all levels are formally responsible for committing to making the company a “joyful place to work”

13. The Company – Patient Capital • Shares of the company may be sold only once every 10 years • Only 10% of the company’s shares become available for sale in any single year

14. The Company – Management Succession • Three of the co-CEOs may replace the fourth at any time • The Board may replace all four co-CEOs at any time, but may not replace less than four

15. The Company – Board of Directors’ Responsibilities • The Board has three prime responsibilities: • to assure the company meets all legal, regulatory, environmental, fiduciary, etc., requirements • to assure that the top management team is pursuing the company’s stated purpose as its primary objective and that it exemplifies the company’s mandated leadership style • to replace all four co-CEOs if they stray from the purpose and required leadership style and/or if the company is not sustaining itself financially

16. Would You Be Interested in this Company? – LEADING Please assume: • The company is in a field of endeavor where you’d like to build your career, at least for a while • You are in an appropriate career stage for being a CEO • You are competent to perform well in a top management position • You have been offered the position as co-CEO in this company

17. Would You Be Interested in this Company? – LEADING 1. Would you accept the job of co-CEO? • YES, under the conditions specified above ___ • NO, no matter how it might be altered in negotiations ___ • ONLY if some conditions were altered (please think about which ones) ___ 2. If you answered a or c above:How many individuals do you currently know with whom you would love to work as co- CEOs (under conditions acceptable to you)? ___

18. Would You Be Interested in this Company? – INVESTING Please assume: • You are deciding about investing some of your considerable funds for the long term, for example: • for your very young children’s college education (say 15-20 years from now) • for your retirement (say 20-40 years from now)

19. Would You Be Interested in this Company? – INVESTING If the company were managed under the specified conditions: 3. Would you purchase stock in the company if you had to abide by the stock sale provisions? • YES ___ • NO ___ 4. Would you purchase stock in the company if you (and other investors) could sell your shares at any time whatsoever • YES ___ • NO ___

20. Would You Be Interested in this Company? – WORKING Please assume: • You are in your current work and life situation 5. Would you be interested in joining the company in a position similar to the one you currently occupy or are looking for? • YES, definitely ___ • MAYBE ___ • NO, definitely not ___

21. Would You Be Interested in this Company? – BUYING 6. As a consumer, would you desire to purchase products and services from a company like this one? • YES, definitely ___ • MAYBE ___ • NO, definitely not ___

22. Why This Type of Company? • Purpose • Assumption – making sustainability the purpose of the company will make it more likely it will benefit society • Assumption – such a company may be more long-lived than “traditional” for-profit companies and perhaps even more profitable • Perception – shareholder wealth maximization is a hollow, demeaning, and spiritually empty goal • Desire – to offer a spiritual ethos and guide for all company actions

23. Why This Type of Company? • Leadership and executive compensation • Multiple CEOs • avoid the “heroic leader” who is overworked, isolated, and has no time for family or community • bring multiple skill sets to the role • create time for listening and learning • Lead to higher-quality decisions (that well-functioning teams make)

24. Why This Type of Company? • Leadership and executive compensation • 45 hours/week • CEO(s) remain healthy, alert, vital • Models the company’s commitment to leading a balanced life • 4 x 45 hours = 180 hours > 100 hours from one individual, both in time and quality of work

25. Why This Type of Company? • Leadership and executive compensation • Restrictions on executive compensation • we are unconvinced that higher pay produces better executives • talent pool not so limited • “greed” is not a superior motivation • high compensation leads to dysfunctional behaviors • Exorbitant pay does not lead to happiness • Pay-for-performance systems with the “right” motivation are extraordinarily difficult to create

26. Why This Type of Company? • Leadership style • Consensus decision making • better, possible faster, decisions • A joyful place to work • why would anyone want to work in a place that is not joyful? • “a world with nobody left out” includes employees • A comfortable life style and retirement • to attract and keep employees • to avoid “affluenza”

27. Why This Type of Company? • Leadership style • Level Five Leadership • passion • humility • Servant Leadership • collaboration • trust • foresight • listening • ethical use of power and empowerment

28. Why This Type of Company? • Patient capital • Eliminate short-term management focus and dangers of “managerial cocaine” • Eliminate need to respond to traders rather than long-term investors • May require higher rate of return due to liquidity risk • May require lower rate of return if risk of corporate failure is lower and profitability is higher

29. Why This Type of Company? • Management succession and leadership continuity • Easier to replace one of four CEOs than a single CEO if/when a resignation, retirement, illness, death, disability, etc., occurs • Better management continuity with three CEOs continuing in place while and when the fourth one is being replaced • Lower chance of making a bad succession decision • Less of a problem if a bad succession decision is made

30. Now What? • Three questions we believe are worth pursuing about alternative organizational designs: 1. Are they desirable? 2. Are they feasible? 3. Are they already emerging?

31. Now What? • Two requests: • We request assistance in filling in the gaps in our thinking • Books, articles, working papers, videos, speeches, etc. • We request assistance in locating companies that have experimented with or adopted any of the key elements in this model