In the previous video, we focused
on how the corporation is changing in the United States.
But what about corporations around the world?
Turns out there's quite a bit of variation
both across countries and over time.
So let's take a brief tour of what's
happening in other places.
Corporations in the United Kingdom, Canada, Australia
tend to follow the US model of putting shareholder value very
high in their priorities.
But they haven't gone quite as far.
For example, CEOs aren't paid as much in those countries
as in the United States.
So the gap between CEO pay and average worker pay
isn't nearly as much as we have in the United States.
But some other countries, like Germany and Norway and Sweden,
have tended to take much more of a multiple stakeholder
view of the firm and its responsibilities.
We can best see this as the way companies
are organized in Germany.
So let's take a look at Germany.
In Germany, the board of supervisors,
equivalent to boards of directors in the United States,
is made up of large representatives
of large financial institutions and representatives
of employees, sometimes equal numbers and sometimes different
percentages.
But employees play a role in corporate governance
directly in Germany.
At the workplace level, there are consultative bodies called
works councils, elected bodies elected by blue collar workers,
production workers, white collar workers, managers,
and supervisors, all there to provide advice
to the company on its human resource and employment
practices.
And in fact, the company has to listen to the works council
when it makes changes in employment policies.
Then corporations are also very active in training,
working together at the original level with vocational schools
and with labor to build apprenticeship programs so
that they have an adequate supply of workers
for today's economy and for tomorrow's technology
and economy.
So in Germany and in European countries,
you tend to see much more of the corporation taking
a responsible role for these kinds of activities.
Let's look at another example, Japan.
Japan has corporate boards that have basically three groups.
First, they have the investors, the banks.
Secondly, they have suppliers and the network of suppliers
that firms have long term relationships with.
And third, they have internal corporate executives.
And in fact, often the most influential executive
in Japanese corporations sitting on these boards
is the human resource executive.
And that's one of the reasons why
we see longer term employment security
part of the Japanese tradition.
We see much more investment in training and development
of employees from within.
Now these practices are changing.
Japan's economy has been struggling
to adapt to a more innovative, flexible economy.
And so some corporations open to international competition
have moved more toward the American model in recent years.
So nothing is cut in stone.
Changes happen from time to time as the economy changes.
Here's another example, Korea, also in the throes of change.
Korea also has a long history of very large corporations, very
paternalistic, long term employment security.
But as Korea has made a very strong effort
to become more flexible, more innovative,
some of these traditions are changing.
And that's led to lots of conflict
over the appropriate role of the corporation in Korea.
So there is a country that is in the throes of change.
We'll have to wait and see how it plays out.
Some companies in various countries
have charted their own course, independent of what
the government is doing.
For example in Brazil, there's a very famous company
called Semco that in the 1980s, a new CEO took over
by the name of Richard Semler.
And he helped grow that company from about $2 million
in revenue to over $200 million in about a decade.
And what did he do?
He said let's democratize the organization.
Let's let workers shape their own jobs.
Let's let workers help us to figure out
how we can expand into new industries
and diversify this company and become
part of the world economy.
And in fact he's been recognized for his leadership
and his vision by the World Economic Forum, which
described him and gave him an award as one
of the global leaders of tomorrow.
Likewise in Finland, a company by the name of Nokia,
known well in the telecommunications industry
and in the phone business, had a very difficult time adjusting
to changes in its markets.
And so it's had to restructure and lay off a lot of workers.
But as it did so, it decided that it
would allow workers to take some of the product development
ideas that they had been working on and some of their own ideas
for new directions for the company
and start their own companies.
And they would support these employees
during this transition period.
So you can see that companies can
shape their own corporate governance arrangements, even
within a national government.
Well, what can we learn from this very quick survey
around the world of how corporations
structure themselves?
I think there are two lessons.
First, there's no one best way.
The American mantra of profits over everything else
isn't necessarily copied around the world.
There are different approaches.
And the second thing to recognize
is that these all have to adapt over time to changes
in the economy, to changes in the workplace issues
that we are facing.
And so we can change our corporate governance policies,
even within a country, when necessary.
And so I think this is good news.
It means there is no one best model.
It means that we can adapt over time.
And it means that we have some choice over how we structure
the role of the corporation in response to its shareholders
and other stakeholders in society.
So let's get on with thinking about what
role do we want the corporation in our society
to play today and tomorrow.