By Colin Mayer
What is business for? Day one of a business course will tell you: it is to maximize shareholder profit. This single idea pervades all our thinking and teaching about business around the world but it is fundamentally wrong, Colin Mayer argues. It has had disastrous and damaging consequences for our economies, environment, politics, and societies. In this urgent call for reform, Prosperity; Better Business Makes the Greater Good challenges the fundamentals of business thinking. It sets out a comprehensive new agenda for establishing the corporation as a unique and powerful force for promoting economic and social well-being in its fullest sense - for customers and communities, today and in the future.
First Professor and former Dean of the Säid Business School in Oxford, Mayer is a leading figure in the global discussion about the purpose and role of the corporation. In Prosperity; Better Business Makes the Greater Good, he presents a radical and carefully considered prescription for corporations, their ownership, governance, finance, and regulation. Drawing together insights from business, law, economics, science, philosophy, and history, he shows how the corporation can realize its full potential to contribute to economic and social well-being of the many, not just the few. Prosperity tells us not only how to create and run successful businesses, but also how policy can get us there and fix our broken system.
Propsperity in short:
- Offers a radical reformulation of our notions of business, its roles and responsibilities, and the way it operates
- Argues that the prevailing beliefs about business cause inequality, low growth, poor innovation, and environmental degradation
- Sets out a renewed vision of how the corporation can create both economic and social wellbeing, and how regulatory and taxation can make this a reality
Peter Chadwick on IEDP Developing Leaders wrote:
"Prof Mayer’s main target is Milton Friedman’s argument that the purpose of companies is only to make profits, subject to law and (minimal) regulation. Today, this is presented as the obligation to maximise shareholder value. Behind this is the view, which goes back to Adam Smith, that the principal challenge is the 'agency problem' — the relationship between owners and agents (the managers). 'The problem with the Friedman view,' insists Prof Mayer, 'is that it is hopelessly naive.' It is based on 'simple and elegant economic models that simply do not hold in practice'. The idea that businesses pursue profits and only profits, can, he argues, only produce bad businesses and dire outcomes. This is so for three reasons: human, social and economic. [...] The implication of Prof Mayer’s book is that the canonical Anglo-American model of corporate governance, with equality among shareholders, widely distributed share-ownership, shareholder value maximisation and the market in control is just one of many possible ways of structuring corporations. There is no reason to believe it is always the best. In some cases, it works. In others, such as highly-leveraged banking, it really does not. We should be explicitly encouraging a thousand different flowers of governance and control to bloom."
Diane Coyle on The Enligthened Economist wrote:
"So far, the defenders of capitalism have failed to find a convincing voice or to offer any significant ways to improve how business is perceived. Now, in his new book, Prosperity: Better Business Makes the Greater Good, Colin Mayer [...] provides answers and a coherent manifesto for change. [...] Mayer calls for a reinvention of the corporation centred on values and a purpose that encompasses social good. He calls for ownership to be in the hands of investors with a real interest in long-term sustainability and in corporate governance that holds business leaders accountable both for defining corporate purpose and for delivering it. He envisions a world of 'purpose pursuing people and companies, enabled by law, committed by regulation, partnering with government' that can realize the corporation’s full potential to contribute to economic and social wellbeing of all."
"The book argues passionately and convincingly that making a profit for its owners is an essential task of business, but certainly not the purpose of a company. A corporation is not a set of contracts, but of relationships: 'Those relations are based on trust. That trust depends on commitment and that commitment is to the purpose of the corporation – a purpose that inspires and unites all to a common goal of producing profitable solutions to the problems of people and planet.' Mayer points out that in the US and UK, public equity markets are shrinking as companies delist and private equity grows. He argues the merits of family owned businesses, including additional voting rights to protect their interests, I’m not convinced by this. [...] The book ends though with some pragmatic reforms [...] These seem perfectly sane and practical. Will any government pick them up?"
Colin Mayer on Responsibility of the Corporation
A 14-minute talk from March 2018:
Mayer on the Transformational Power of International Business
"There’s a power in the world: the most powerful force there is - and it could be an evil force. But it can also be the biggest force for good. That force: multinational business. Colin Mayer explains his vision for how business can and must transform itself and its impact on the world." - An 18 minute TedX talk from February 2015:
About Colin Mayer
Colin Mayer is the Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford. He is a Professorial Fellow and Sub-Warden of Wadham College, Oxford and an Honorary Fellow of Oriel College, Oxford and St Anne's College, Oxford. He was appointed CBE for services to business education and the administration of justice in the economic sphere in 2017. Colin Mayer was the first professor at the Saïd Business School, and the first Director of the Oxford Financial Research Centre. He was also previously the Peter Moores Dean of the Business School. He was a Harkness Fellow at Harvard University, a Houblon-Norman Fellow at the Bank of England, and Leo Goldschmidt Visiting Professor of Corporate Governance at the Solvay Business School, Université de Bruxelles. He is the academic lead for the British Academy's Future of the Corporation research program, which addresses the changing relationship between business and society.
Table of Contents of Prosperity; Better Business Makes the Greater Good
Part I: Principles
Part II: Provenance
Part III: Practice
Part IV: Policy
Part V: Partnership