Edit ModuleShow Tags

As CEO, Who Is Your Master?

Purpose, profit and stakeholders must all be served


Published:

Milton Friedman says a company’s sole obligation was to serve shareholders. A group of CEOs of the largest organizations in America recently took issue with that and said companies must consider all stakeholders. Purpose and profit must both be served.

I’m a fan of Friedman’s and still believe that the company’s primary (not sole) obligation is to serve shareholders. I also believe that how a firm goes about its business is critical. Treating employees with respect, vendors as partners and customers with love is the best way to run an organization for the long-term success of the enterprise and its shareholders. (To hell with the day traders. They’re just gamblers.)

Boxed in by what’s legal and what’s ethical, companies should serve shareholders, but a company is not the proper vehicle to solve all society’s ills. Expecting them to do so is foolish. Capitalism has solved many more problems than it has created but trying to stretch the concept of a corporation too far will deny it success and lead to lost jobs and disgusted shareholders. I don’t know what’s in your retirement account, but if the firms I’m invested in suddenly decided to take all their assets and try to solve the water problem in India, I’d have an issue with that.

Most of you realize that this is a very deep issue. And if you react to headlines alone, you’ll miss the nuances of the conversation (and be tainted as a radical communist or a selfish capitalist). Rather than try to get deep inside the head of Friedman or Jamie Dimon, I’d like to ruminate on what this issue means for the “average hard-working CEO” with multiple shareholders. (If you own the enterprise, do what you want.)

Here’s my counsel: Take great care of your people, customers and environment as you try to maximize shareholder value over the long term.

The rub is that you’ll have some conflicts to moderate. That’s why you get the big bucks (though hopefully not a million times that of your average worker). Employees’ desires sometimes conflict with those of customers as well as your right to make a return on your capital. Customers would rather have your products for free. Your manufacturing is likely not zero impact on the environment. So use common sense, be ethical and think long term. You won’t always get it right, but you should damn well try.

Edit Module
Todd Ordal

Todd Ordal is president of Applied Strategy®. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He is a former CEO and has led teams as large as 7,000. Todd is the author of Never Kick a Cow Chip On A Hot Day: Real Lessons for Real CEOs and Those Who Want To Be (Morgan James Publishing, 2016). Connect with Todd on LinkedIn, Twitter, call 303-527-0417 or email todd@toddordal.com.

Get more content like this: Subscribe to the magazine | Sign up for our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

A new firm identifies, services a gap in the building industry

FRDC has a team of ten that can help architects, contractors, designers and developers manage their projects’ logistics from start to finish. The center also offers consultative project management services and product and design guidance.

The many ways to put your people first

You may be wondering what you should continue to do, what you should quit doing and what new trends you should adopt to ensure a competitive workplace. In making your decisions, remember that people are your north star and you’ll be headed in the right direction.

Colorado ranks first in the US for LEED Green Building

The new list, announced today by the U.S. Green Building Council, ranks states based on the number of LEED certified square feet per person in the last year.
Edit ModuleShow Tags
Edit ModuleEdit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags