Published on: January 10, 2014by Kevin Coupe
There was an interview yesterday on National Public Radio's Morning Edition that I think is worth listening to.
The interviewee was Hedrick Smith, former Washington bureau chief for the New York Times and author of a book entitled "Who Stole the American Dream?" And the subject was stakeholder capitalism vs. shareholder capitalism.
Specifically, Smith was talking about a labor agreement reached in Seattle between Boeing management and organized labor that will result in Boeing keeping its operations in Washington State for the next decade. However, while the deal is seen as being critical to the Washington economy, it also included steep cuts in health and retirement benefits for tens of thousands of workers, which Smith suggested could have an impact on the area's middle class, and is emblematic of a broader trend in America that heightens economic inequalities. Smith suggests that while the skilled Boeing workforce had to swallow benefit cutbacks, top execs engineered for themselves benefits that came in the form of stock, and then, essentially, pursue strategies that are designed to increase the company's stock price.
Smith says that this illustrates a shift from stakeholder capitalism to shareholder capitalism, and while he says that both are forms of American capitalism, one is a more traditional view, and the other has gained greater traction in the new economy.
This struck me as relevant to the issue I raised yesterday regarding the decision by Macy's to lay off 2,500 employees even after having a relatively strong holiday shopping season, because of what the company described as a desire to improve efficiency. The company also said that it would have no discernible impact on service levels.
I wrote yesterday, in part:
When I see a story like this, I find myself wondering if it is really about efficiency, or is it about making cuts that will drive up the stock price, because in the end, the company sees shareholders as more important than customers?
Here's what I know - there are now 2,500 people who, at least in the short term, have had their ability to buy anything (much less from Macy's) seriously curtailed. Not good for the economy as a whole, and maybe not even good for Macy's.
I'm not saying that Macy's is or isn't living up to its responsibilities here. I'm just wondering how the company defines its priorities … and suggesting that the bigger question - about efficiency vs. effectiveness, and profitability vs. productivity - deserves discussion within this context.
I'm not suggesting here that a company's stock price has no importance, though there are those who would suggest that too many companies are too focused on Wall Street while paying too little attention to Main Street. But I think that the question bears consideration … whether success is being defined in ways that creates an economy that is more of a house of cards than it needs to be, or ought to be. And whether, in the long run, such an approach is sustainable.
As I say, the Hedrick Smith interview is worth listening to. And thinking about. You can hear it by clicking here.
- KC's View: