There has been a good deal of writing lately within the management field (seen in both popular and scholarly writing--a couple of nice exemplars are Justin Fox's article in The Atlantic and Lynn Stout's book The Shareholder Value Myth) on the demise of shareholder value as a guiding goal of corporations. One management writer even suggests that shareholder value is (or, rather, was) "the world's dumbest idea," though one that's still taught to MBAs as conventional wisdom.
If shareholder value is dead, this work then wonders what is the "real" measure of value that firms should adopt in its place. One common alternative is that a determined focus on the customer, rather than the shareholder, is key in the formula for organizational success. Management guru (and Boulder resident) Jim Collins, in Good to Great, suggests that firms should pursue big, audacious goals that have no intrinsic connection to stock price--though, of course, the firms he counts as "great" are those that have provided shareholder returns over time. As another alternative, Steve Coll, in his book Private Empire: ExxonMobil and American Power shows how former ExxonMobil CEO Lee Raymond enjoined Wall Street analysts in the mid-1980s to reject traditional measures of firm performance and to instead substitute "return on capital employed," a measure of how well the company used capital it appropriated from previous earnings or borrowed (it didn't catch on, either in in the oil industry or more generally).
In other words, those inside the system want to overthrow the dominant ideology and replace it not with some radical alternative, but with something that becomes a proxy for (or an alternative route to) shareholder value. And the alternatives still seek to guarantee firm performance--in the long term rather than merely the short term--which is a long way away from a dramatic departure from the conventional.
In a sense, moving in this direction is a rather pragmatist stance: It's a refusal to take a stance, with the argument that communities arrive at answers to such questions through complex and power-laden processes of communication.
From this perspective, the interest turns to how we can access and analyze the (historical) processes by which a given logic of value creation (and, thus, conception of value) becomes ascendant, and how we can then trace the consequences of its pursuit. An attention to communication shifts the focus away from the ways managers engineer contracts or resources to achieve particular ends, and instead encourages an analysis of the authoring of both the firm and the institutional field, replying on the knowledge that multiple logics can be competing at any given time, that a logic may be employed in a hypocritical way, and that any pursuit of a given logic of value is likely to have unintended consequences.
Another way of saying this is that we need an account that develops a communicative explanation for the existence of an entity or a practice--where a "communicative explanation" is "any account that hones our understanding of how communication constitutes organizational reality, clarifies how communication works as an organizing mechanism, or illuminates communication (rather than, for instance, physical location) as the site of organization” (Ashcraft, Kuhn, & Cooren, 2009, p. 23). More of those would certainly be great for the organization studies field, but they don't necessarily either break with existing logics of value or present alternative arguments about the constitution of a firm.
The question, then, is what that stance should look like. That's the challenge facing those who see organizing and communicating (as in the title of this blog) as socially-important practices requiring a new way of seeing. In sum, it's all well and good to celebrate the death of the dominance of shareholder value as a discourse and logic of value. But if we substitute an alternative that merely aims at the same sort of outcome--"performance," measured by the stock indicators that have dominated it for a long time--then we've made very little change to our understandings of firms and their place in our world. Until we start thinking more broadly about value--about values beyond those expressible in a monetary code--it's unlikely that firms will be active contributors to social progress.
The issue being debated in this work is what is right, correct, and even morally responsible as a foundational and fundamental goal/mission of the firm. The question is what heuristic should guide decision-making all throughout the firm, and either shareholder value or customer satisfaction are pretty simple guides. I don't think that there's a single correct answer to the question of what the firm should be about. I also don't think a communicative view--the sort I propound--has a single alternative that is somehow superior (though it can cast light on practices of value creation that are often overlooked). The important question, rather, is how it is that some forms of value become dominant (across entire industries, among financial analysts, etc.) and what the consequences are of pursuing these logics of value creation. And an additional question is who--or what group--benefits from the logic guiding the firm.
Monday, August 12, 2013
Sunday, August 4, 2013
Firms as Possessors of Values: You Can't Have it Both Ways
One of the central issues for those who (like me) think that the way we think about organizations makes a difference in what those organizations do is this: Just what capacities should we associate with these things called corporations? This is often talked about in relation to the 'nature' of the firm, where the firm is a for-profit business corporation--in other words, a firm is a special case of an organization. (I've put nature in scare quotes there to suggest that firms are social entities or processes rather than natural ones, and I'm averse to suggesting that anything social possesses a 'nature.' Thus, I'd like to consider the character of firms, which points up the fact that what firms are is what we have constructed them to be--not a radical move, I know, but an important one, and important for me to note the shift in terms.)
The question, then, is what we consider firms to be, and what characteristics and abilities we think they have, or should have. This is not an esoteric or 'academic' question by any means. In fact, it's key to legal concerns about firms and their responsibilities, and it's been in the news quite a bit over the past several years. The issue became perhaps most pointed in the wake of the U.S. Supreme Court's Citizens United ruling, when 'corporate personhood' suddenly became a term that cropped up at dinner parties. The notion of corporate personhood, generally, is about the inability of the state to restrict the speech rights of collectives, since collectives are (at least for many, including the majority of the Court) conceived to be vehicles--tools--to express the interests of their members. In this sense, there is no basic difference between informal groups, labor unions, lobbying organizations, interest-based associations, and limited liability corporations.
And then in the summer of 2012, several firms in the U.S. (as well as organizations run by the Catholic Church) began reacting to elements of Obamacare (the Affordable Care Act)--specifically, to the provision that firms would have to include provisions for birth control in their health care plans. (The concern is framed as one of religious freedom: If I, the employer, hold religious convictions in which birth control is morally reprehensible--and a good number of those on the religious right do--any law that forces me to pay for my employees' birth control is not merely morally corrupt, but could be unconstitutional in the U.S.) This is a legally complicated issue, and it's one that will soon come before the Supreme Court (see Dahlia Lithwick's nice overview in Slate).
Among those who talk about this issue, it is rare to see an interrogation of first principles, of what we have made firms to be and what we want them to be. There seems to be an assumption that some of the moves I made in the previous two paragraphs--portraying firms as tools, portraying the tool as carrying the interests of the employer, and portraying employers as having simple and unitary stances on such moral issues--are beyond question. But questioning them is precisely what the Supreme Court should be doing; if they're not going to do it (and they probably won't), perhaps academics interested in communicating and organizing should.
The most common vision of firms is that they're nexuses of contracts; that the firm is a coordination vehicle to manage the myriad of contractual agreements between those selling their labor and those buying the labor. From this economic view, there's no problem in suggesting that firms could 'have' values like those of religious conservatives, because 'the employer' can set the contract terms, as long as those terms don't run afoul of other legal codes. When there is no single entrepreneur or sole proprietor to engineer the contracts, the law draws upon a version of agency theory (the principal-agent model), in which the executives and managers of the firm act in the interests of the owners, and thus are granted the capacity to establish the contracts marking the firm (and, incidentally, they are also given the ability to decide how to spend the dollars in the pursuit of 'free speech' from the Citizens United case.)
What's interesting in this view is the legal environment surrounding the corporation: Most corporations operate on the notion of limited liability, in which the assets of owners, executives, and managers are protected in the case of legal suits and against financial losses. Limited liability is not a defense against every sort of malfeasance, of course, but it does serve as a shield because it separates the firm from the persons running it.
If there's a legal separation between the firm and its authorities, then, how can those persons assert that the firm's values are the same as their individual values? How is it that, in other words, that a legal system allows the owner of Hobby Lobby stores to claim that his religious convictions prevent him (personally) from using his (personal) firm to pay for a health care plan that would include contraception and, at the same time, protects him from paying from his (personal) finances should, say, a shopper become critically injured in one of his stores? To my mind, at least, you can't have it both ways.
I don't know that there's a 'correct' answer to the question guiding this post--the one of how we should think of the character of firms. And though I certainly have my personal political stance(s), I also don't think this question is motivated by agreeing or disagreeing with the cases at hand.
But I do think this points up the importance of laying bare our thinking about firms, because legal and economic systems have visions that fail to move beyond the nexus of contracts and agency theory views I mentioned above.
What if we think of firms differently? What if we see them as gamepieces? It's a pretty radical departure from economic thinking, but it would imply that firms are vehicles/tools used in game-playing--where the game is both an effort to attract capital (particularly economic capital [i.e., money] but also social, cultural, symbolic, and perhaps even linguistic capital) and to have an impact upon the world in which one lives. This view of firms would recognize that those in positions of authority are granted the ability (by contemporary Western legal-economic principles) to deploy the gamepieces at their whim. And that, then, should force us to examine why we tend to ignore the games in which firms are used, how we might better conceive of the relationships between the political and economic spheres, and how we might better understand struggles for authority in firms.
If the games in which the gamepieces are developed and deployed are communicative (and they are), this framing would also force us to see firms as texts. More on that to come.
In other words, this would be a move well beyond accusing some elite bourgeoisie of using companies as toys for their own entertainment, and more about how firms can be texts deployed in struggles over meaning in everyday socio-economic life.
Of course, firms are also very much discursive-communicative systems on their own (and the communicative-as-constitutive [CCO] perspective on organizing has been at the forefront of addressing this topic). One of the most interesting questions, then, is how the communicative accomplishment of the firm intersects with, and is affected by, the more 'political' conception of the firm seen as a gamepiece. Too little of that CCO perspective has explored this question, but it's key for our ability to address the issue of whether firms 'have' values.
Asking questions and posing new portrayals is all well and good, of course, but then comes the big question: so what? What does doing so get us, and how is that outcome superior to what dominates our thinking? It may well be the case that existing conceptions of the firm are limited, but it becomes incumbent upon an alternative to not merely be different, but to show how that difference can participate in substantive change. In a sense, that's what this blog will be about.
The question, then, is what we consider firms to be, and what characteristics and abilities we think they have, or should have. This is not an esoteric or 'academic' question by any means. In fact, it's key to legal concerns about firms and their responsibilities, and it's been in the news quite a bit over the past several years. The issue became perhaps most pointed in the wake of the U.S. Supreme Court's Citizens United ruling, when 'corporate personhood' suddenly became a term that cropped up at dinner parties. The notion of corporate personhood, generally, is about the inability of the state to restrict the speech rights of collectives, since collectives are (at least for many, including the majority of the Court) conceived to be vehicles--tools--to express the interests of their members. In this sense, there is no basic difference between informal groups, labor unions, lobbying organizations, interest-based associations, and limited liability corporations.
And then in the summer of 2012, several firms in the U.S. (as well as organizations run by the Catholic Church) began reacting to elements of Obamacare (the Affordable Care Act)--specifically, to the provision that firms would have to include provisions for birth control in their health care plans. (The concern is framed as one of religious freedom: If I, the employer, hold religious convictions in which birth control is morally reprehensible--and a good number of those on the religious right do--any law that forces me to pay for my employees' birth control is not merely morally corrupt, but could be unconstitutional in the U.S.) This is a legally complicated issue, and it's one that will soon come before the Supreme Court (see Dahlia Lithwick's nice overview in Slate).
Among those who talk about this issue, it is rare to see an interrogation of first principles, of what we have made firms to be and what we want them to be. There seems to be an assumption that some of the moves I made in the previous two paragraphs--portraying firms as tools, portraying the tool as carrying the interests of the employer, and portraying employers as having simple and unitary stances on such moral issues--are beyond question. But questioning them is precisely what the Supreme Court should be doing; if they're not going to do it (and they probably won't), perhaps academics interested in communicating and organizing should.
The most common vision of firms is that they're nexuses of contracts; that the firm is a coordination vehicle to manage the myriad of contractual agreements between those selling their labor and those buying the labor. From this economic view, there's no problem in suggesting that firms could 'have' values like those of religious conservatives, because 'the employer' can set the contract terms, as long as those terms don't run afoul of other legal codes. When there is no single entrepreneur or sole proprietor to engineer the contracts, the law draws upon a version of agency theory (the principal-agent model), in which the executives and managers of the firm act in the interests of the owners, and thus are granted the capacity to establish the contracts marking the firm (and, incidentally, they are also given the ability to decide how to spend the dollars in the pursuit of 'free speech' from the Citizens United case.)
What's interesting in this view is the legal environment surrounding the corporation: Most corporations operate on the notion of limited liability, in which the assets of owners, executives, and managers are protected in the case of legal suits and against financial losses. Limited liability is not a defense against every sort of malfeasance, of course, but it does serve as a shield because it separates the firm from the persons running it.
If there's a legal separation between the firm and its authorities, then, how can those persons assert that the firm's values are the same as their individual values? How is it that, in other words, that a legal system allows the owner of Hobby Lobby stores to claim that his religious convictions prevent him (personally) from using his (personal) firm to pay for a health care plan that would include contraception and, at the same time, protects him from paying from his (personal) finances should, say, a shopper become critically injured in one of his stores? To my mind, at least, you can't have it both ways.
I don't know that there's a 'correct' answer to the question guiding this post--the one of how we should think of the character of firms. And though I certainly have my personal political stance(s), I also don't think this question is motivated by agreeing or disagreeing with the cases at hand.
But I do think this points up the importance of laying bare our thinking about firms, because legal and economic systems have visions that fail to move beyond the nexus of contracts and agency theory views I mentioned above.
What if we think of firms differently? What if we see them as gamepieces? It's a pretty radical departure from economic thinking, but it would imply that firms are vehicles/tools used in game-playing--where the game is both an effort to attract capital (particularly economic capital [i.e., money] but also social, cultural, symbolic, and perhaps even linguistic capital) and to have an impact upon the world in which one lives. This view of firms would recognize that those in positions of authority are granted the ability (by contemporary Western legal-economic principles) to deploy the gamepieces at their whim. And that, then, should force us to examine why we tend to ignore the games in which firms are used, how we might better conceive of the relationships between the political and economic spheres, and how we might better understand struggles for authority in firms.
If the games in which the gamepieces are developed and deployed are communicative (and they are), this framing would also force us to see firms as texts. More on that to come.
In other words, this would be a move well beyond accusing some elite bourgeoisie of using companies as toys for their own entertainment, and more about how firms can be texts deployed in struggles over meaning in everyday socio-economic life.
Of course, firms are also very much discursive-communicative systems on their own (and the communicative-as-constitutive [CCO] perspective on organizing has been at the forefront of addressing this topic). One of the most interesting questions, then, is how the communicative accomplishment of the firm intersects with, and is affected by, the more 'political' conception of the firm seen as a gamepiece. Too little of that CCO perspective has explored this question, but it's key for our ability to address the issue of whether firms 'have' values.
Asking questions and posing new portrayals is all well and good, of course, but then comes the big question: so what? What does doing so get us, and how is that outcome superior to what dominates our thinking? It may well be the case that existing conceptions of the firm are limited, but it becomes incumbent upon an alternative to not merely be different, but to show how that difference can participate in substantive change. In a sense, that's what this blog will be about.
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