13th January 2021. Purpose | China
Changing “corporate purpose”; Taking stock of China
Welcome to Just Two Things, which I plan to write daily, five days a week, if I can manage it. Some links may also appear on my blog from time to time. Links to the main articles are in cross-heads as well as the story.
#1: Changing “corporate purpose”
One of the few benefits of the pandemic is that it has finally killed off any idea that there was ever any merit in the notion of “shareholder capitalism” (pdf). The whole stakeholder argument has definitely won.
But an interesting article in strategy+business suggests that the pandemic has also forced companies to sharpen up what they mean by their corporate purpose. You can’t get away with the sort of guff that WeWork used to spout, which was to “elevate the world’s consciousness.” (Which should have been a clue about how dodgy the company was).
Employees, says Adam Bryant in the article, expect companies to make concrete commitments, whether that’s the Marriott CEO and Board taking a 50% pay cut during the pandemic or Levi’s banning customers from carrying guns in stores (ah, America):
Everyone, including employees, customers, and certain institutional shareholders, is expecting and demanding more from companies: that they embrace diversity in a meaningful way. That they stand for something, and show meaning beyond marketing buzz phrases. That they care about the environment and dealing fairly with suppliers. To win in business over the long term, you need to attract and retain the best talent, and the best talent now expects more from employers than a paycheck.
If you’re at all interested in China, this long, long review by Dan Wang of the state of China in 2020 is definitely worth some of your time. (And as the saying goes, even if you’re not interested in China, China is interested in you). The China section is the first half of Dan’s review of the year.
Sections I and II look at China internally. Here’s a flavour:
In [Xi’s] tenure, he has unleashed a torrent of new initiatives. In my view, he feels that the practice of governing China under socialism cannot be an exercise in sustained mendacity…
Consider two of his most important initiatives: the campaign against corruption and the move toward law-based governance. Xi has decided that corruption is not a mystery to be endured, but a problem to be solved. A few years past the peak of the crackdown, it’s fair to say that the campaign hasn’t solely been effective in removing his adversaries, but has also been broad enough to restore some degree of public confidence in government.
And for years, Xi has emphasized following clear rules of written procedure, under the rubric of “law-based governance.” Since then, the state has improved regulatory systems, for example in setting clear standards for license approvals and in securities and antitrust regulation.
[But] the state has prosecuted a decade-long effort to suppress the views it doesn’t like. Not only has the government ramped up censorship, society as a whole is developing greater intolerance for dissenting ideas…
Greater censorship over the last decade has coincided with still-impressive levels of economic growth as well as the growing competitiveness of many more companies… But there’s more on-the-ground evidence that ordinary people are growing nervous. In so many settings, one has to tread on eggshells in a public discussion in China… I wonder if the right analogy for China today is as a successful East Germany.
Section III looks at the US technology sanctions, and concludes that they’re likely both to be ineffective and probably counter-productive in the long term. Counter-productive because they open up supply chain opportunities to Chinese companies who would be otherwise unable to compete with US firms:
With these regulations, the US has initiated one of the greatest and strangest antitrust actions ever, against potentially all American exporters….Meanwhile in China, these actions have triggered a surge of interest in mastering technology. For the first time arguably since the industrial rise of Japan in the 1950s, a major country is committed to thinking deeply about the invention of its own tooling. A whole generation of scientists and engineers must examine foundational problems like to build leading tools (like lithography machines) and create the best materials (like wafers and chemicals). And the state is fully behind that effort.
(h/t to Ian Leslie’s newsletter, The Ruffian).
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