Democracy in business
Voting in last weekend’s NSW local elections got me thinking about the kind of world it would be if business leaders had to be similarly elected. Would it make any difference to how organisations were run?
Imagine if CEOs had to be voted in by shareholders, customers, and staff. We’d probably have more women in senior positions because leaders would seek to appease a “core constituency”. Executives would be unlikely to continue feasting on obscene salaries. And perhaps the unsustainable obsession with perpetual growth would be substituted with more conscionable practices.
There are higher costs associated with having more voices in the system.
But is it possible? And could it work? I sought the advice of three experts.
Timothy Devinney is a Professor of Strategy at the University of Technology, Sydney. “It’s absolutely, completely unworkable,” he tells me. “It wouldn’t work for a host of reasons, one of which would be: how do you decide who would fall into the set of groups with voting rights?”
But let’s say you could decide. Let’s assume that — somehow — we were able to devise the perfect formula of constituents. Would that change things?
“No, not really,” he replies. “There are higher costs associated with having more voices in the system.”
Dan Lovallo tends to agree. He’s a Professor of Business Strategy at the University of Sydney. He foresees special interest groups, such as trade unions, buying up stock in an organisation to maximise their influence over the leadership appointments, using their newfound power to “push bosses around”.
“That’s a nightmare waiting to happen,” he says. “There’s a lot of room for blackmail. It would be a free-for-all. You would turn business into politics and I’m not sure that’s a good idea.”
Someone who was at least intrigued by my hypothesis was Dr Samir Shrivastava, a senior lecturer in organisation studies at Swinburne University. Well, intrigued but not convinced.
“I find your question interesting because it is underpinned by two valid assumptions about the current state of affairs,” he said. “One, corporate leaders are not really accountable to anyone; and two, something must be really rotten about our corporate system because it ensures that unbelievably inept people keep rising to the top with unfailing regularity.”
But he doesn’t believe democratic elections are the answer, mostly because the electorate would have huge numbers of uninformed voters. And even if informed voting were possible, he believes “the corporate landscape wouldn’t change much. Chance would play as much of a role then as it plays now. And this is frightening or heartening, depending on how you look at it.”
“Frightening because the Sol Trujillos of this world will continue to destabilise the Telstras of this world. And heartening because the unsung leaders across all hierarchical levels will continue working tirelessly, despite immense odds, to save the Telstras of this world.”
In fact, claims Dr Shrivastava, the influence that CEOs have over the bottom line is “overrated” and “the myths around this issue need to be ruthlessly demolished”.
That’s because it isn’t really the head guy or the head gal delivering the results. It’s the people working away on the lower rungs of the corporate hierarchy making the biggest difference. Without the big bucks.
Still, after getting knocked back three times, I realise now that maybe my idea for direct elections sucks. Maybe.
Perhaps there’s a better option somewhere in the middle. One possible solution is Aufsichtsrat. That’s the name given to “supervisory boards” in Germany, a country that enforces their existence by law in publicly listed companies. Supervisory boards consist of shareholders and employees whose approval must be sought before any major decisions are made.
It’s believed these supervisory boards are a reason why German companies haven’t laid off staff to the same extent as the rest of Europe. One study, published in The Economist, explained that this is because a majority of German managers consider stakeholders to be more important than shareholders, unlike managers in the West who regard shareholders as the be-all and end-all.
Surely the time has come to at least follow Germany’s lead.
Do you support the idea of supervisory boards and/or elections? Or do you prefer the status quo?
Follow James Adonis on Twitter @jamesadonis