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Re-creating the For-Profit Company Exploring Alternative Organizational Designs for Global Sustainability James A.F. Stoner and Frank M. Werner Schools.

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Presentation on theme: "Re-creating the For-Profit Company Exploring Alternative Organizational Designs for Global Sustainability James A.F. Stoner and Frank M. Werner Schools."— Presentation transcript:

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

2 Stoner, Werner IAJBS 2009 – Jamshedpur AGENDA Introductions Premise The company Would you be interested in this company? Why this type of company? Now what?

3 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur What is Global Sustainability? Meeting this generations 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 Stoner, Werner IAJBS 2009 – Jamshedpur What is Global Sustainability? Use permitted by Creative Commons – GNU Free Documentation License

7 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 todays 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 years total compensation

11 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur The Company – Patient Capital Shares of the company may be sold only once every 10 years Only 10% of the companys shares become available for sale in any single year

14 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur The Company – Board of Directors Responsibilities The Board has three prime responsibilities: 1.to assure the company meets all legal, regulatory, environmental, fiduciary, etc., requirements 2.to assure that the top management team is pursuing the companys stated purpose as its primary objective and that it exemplifies the companys mandated leadership style 3.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 Stoner, Werner IAJBS 2009 – Jamshedpur Would You Be Interested in this Company? – LEADING Please assume: –The company is in a field of endeavor where youd 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 Stoner, Werner IAJBS 2009 – Jamshedpur Would You Be Interested in this Company? – LEADING 1. Would you accept the job of co-CEO? a.YES, under the conditions specified above___ b.NO, no matter how it might be altered in negotiations___ c.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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 childrens college education (say 15-20 years from now) –for your retirement (say 20-40 years from now)

19 Stoner, Werner IAJBS 2009 – Jamshedpur 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? a.YES___ b.NO___ 4. Would you purchase stock in the company if you (and other investors) could sell your shares at any time whatsoever a.YES___ b.NO___

20 Stoner, Werner IAJBS 2009 – Jamshedpur 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? a.YES, definitely___ b.MAYBE___ c.NO, definitely not___

21 Stoner, Werner IAJBS 2009 – Jamshedpur 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? a.YES, definitely___ b.MAYBE___ c.NO, definitely not___

22 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur Why This Type of Company? Leadership and executive compensation –45 hours/week CEO(s) remain healthy, alert, vital Models the companys 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur 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 Stoner, Werner IAJBS 2009 – Jamshedpur Now What? Two requests: 1.We request assistance in filling in the gaps in our thinking –Books, articles, working papers, videos, speeches, etc. 2.We request assistance in locating companies that have experimented with or adopted any of the key elements in this model


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