SYLLA & STEIGER: CORPORATE MORALITY

October 31, 2014

How would you rate the overall state of moral values in this country today? That’s the question the Gallup organization asks Americans every year. This year’s answers were not atypical. Only 2% of Americans surveyed rated our moral values as excellent – 42% said they were poor – and 74% felt that values were getting worse, not better. How does this translate to the business world? We’ll discuss the state of corporate morality. Financial historian Richard Sylla and award-winning financial editor Paul Steiger discuss how companies have become fixated on short-term stock prices to the exclusion of broader, long-term goals.

WEALTHTRACK Episode #1119; Originally Broadcast on October 31, 2014
Listen to the audio only version here:
Sylla & Steiger

Explore This Episode

We have compiled additional information and content related to this episode. Select a tab from the box below for more.

PROFESSOR RICHARD SYLLA

Professor of the History of Financial Institutions and Markets
, NYU Stern School of Business

PAUL STEIGER

Executive Chairman, 
ProPublica

Consuelo Mack

How would you rate the overall state of moral values in this country today? That’s the question the Gallup organization asks Americans every year. This year’s answers were not atypical. Only 2% of Americans surveyed rated our moral values as excellent, 19% rated them as good, 36% said they are fair – and 42% said they were poor.  Plus, 74% of Americans surveyed felt that values were getting worse, not better.

How does this translate to the business world? What is the state of corporate morality in the U.S. today?  We don’t have a poll but we do have a research paper on “The American Corporation” written by NYU Stern School of Business’ professors, Ralph Gomory and Richard Sylla. Dick Sylla has been a regular on WEALTHTRACK over the years.

It provides a history of the American corporation and how it has  evolved since the nation’s founding in the late 1700s. According to the paper, “The United States from its earliest years led the world in making the corporate form of business organization widely available to entrepreneurs. Starting in the 1790’s, corporations became key institutions of the American economy, contributing greatly to its remarkable growth.” 

Sylla and Gomory provide a brief history of how the mission and responsibilities of corporations have changed over the last two centuries, particularly in recent times, which brings us to the topic at hand: values.

They quoted two paragraphs which highlight the changes in attitude that have occurred among corporate managers about what their primary responsibilities are.

In 1981, the Business Roundtable, an organization of the top executives of large corporations issued a statement recognizing the stewardship obligations of corporations to society: “Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs and build the economy.”      

Gomory and Sylla then contrast that to a Business Roundtable statement made in 1997: “The principal objective of a business enterprise is to generate economic returns to its owners…if the CEO and directors are not focused on shareholder value, it may be less likely the corporation will realize that value.”   

In less than twenty years, prominent executives had narrowed their primary mission statement from providing quality goods and services, creating jobs and building the economy to maximizing shareholder profits.

To discuss this evolution – some would say revolution in corporate priorities, we asked Richard Sylla to join us. He is the Henry Kaufman Professor of the History of Financial Institutions and Markets and Professor of Economics, Entrepreneurship and Innovation at New York University Stern School of Business.

Sylla is also the Chairman of the Board of Trustees of the wonderful Museum of American Finance of which I am also a member.

Our other guest is Paul Steiger, Executive Chairman of ProPublica’s board where he was the Founding Editor-in-Chief, CEO and President.  Prior to that, from 1991 to 2007 Steiger was the Managing Editor of The Wall Street Journal where I had the privilege of working with him. During his tenure the Journal won 16 Pulitzer Prizes. He personally has earned just about every award given in journalism.

We will discuss how corporations have moved from a broad mandate of responsibility to many stakeholders to the current narrow focus on shareholders and what if anything should be done about it.

In this week’s EXTRA feature, available on our website www.wealthtrack.com, Sylla talks about the subject of his latest project, the nation’s first Treasury Secretary Alexander Hamilton, a largely unheralded financial genius who created America’s strong financial foundation.

Enjoy your weekend and make the week ahead a profitable and productive one.

Best regards,

Consuelo Mathews Asia

Read The Paper ‘The American Corporation’

Download it here. [.pdf]

No Bookshelf titles this week.

SYLLA: CORPORATE RESPONSIBILITY

ALIBABA GROUP HOLDING LTD ADR (BABA) Price: $98.31 on 10/29 52-week range: $82.81 – $100.67

Buy Alibaba stock when market drops. BABA Chart

BABA data by YCharts

No stock mentions in this episode.
PREMIUM subscribers have access to this transcript here.

You can also purchase and download this transcript safely and securely with your credit card or PayPal account for $4.99. You will need the free Adobe Acrobat Reader (Mac/Win) or Preview (Mac) to view and print the transcript.

Archive episodes available soon.

JAMES GRANT & RICHARD SYLLA: THE GREAT FED DEBATE!

Is the 100th anniversary of the creation of the Federal Reserve a cause for celebration or condemnation? Has the Fed, as Ben Bernanke said, “come full circle back to the original goal of preventing financial panics? Two financial historians, James Grant and Richard Sylla, debate the benefits and dangers of the Fed and explore its history with us.

WATCH NOW…

A Conversation with Richard Sylla

We marked the 25th anniversary of the 1987 market crash. What’s changed in the 25 years since that fateful Black Monday? I asked financial historian Richard Sylla to give us some historical perspective on markets in crisis.

WATCH NOW…

Additional appearances by Richard Sylla from the Archives

NEXT PROJECT Richard Sylla wears many hats. He is the Henry Kaufman professor of the History of Financial Institutions and Markets and a professor of economics, entrepreneurship, and innovation at New York University Stern School of Business where he teaches multiple courses. He is the author of several books, including co-authoring an industry classic, A History of Interest Rates. His writing has appeared in numerous publications. He is on the editorial board of many publications and he is the Chairman of the Board of Trustees of the Museum of American Finance, a must see museum located at 48 Wall Street in the old Bank of New York building, the bank founded by the nation’s first Treasury Secretary Alexander Hamilton, who is the focus of his next project.


Tagged with:

Back to Top