The Corporation in the 21st Century- John Kay

PART 1: The Background

1: Love the Product, Hate the Producer

“Some of these billionaire executives are no superstars: individuals such as Philip Green, who extracted nine-figure sums from retailer BHS before selling the company to multiple bankrupt Dominic Chappell for £1, Mike Ashley, the domineering boss of the retailer Sports Direct, and Eddie Lampert, who inflicted similar destruction on Sears, for a century America’s leading store chain. The lifestyle of these executives contrasts with the fate of their businesses. The 90-metre yachts of Green and Lampert make good newspaper pictures. Green’s is moored in the harbour of the tax haven of Monaco, where he is resident, while Lampert’s is named Fountainhead, after Ayn Rand’s turgid paean to individualism.

In my book Foundations of Corporate Success, published in 1993, I was sympathetic to the ‘nexus of contracts’ approach, believing – as I still do – that the essence of the firm was an assembly of relationships among individuals. But I did not then realise, as I now do, that the advocates of this idea visualised these relationships as transactional rather than social. A central argument of the present book is that by excessive emphasis on the transactional nature of business relationships we have undermined not only the relationship between business and society but also the effectiveness of business, even in transactional terms.

11: Value

“Business is embedded in a social, political and cultural environment, and we cannot understand its outcomes without understanding these interrelationships. Nor seriously maintain that the outcome of market allocation is a distribution of resources based on desert – the moral rather than the sandy kind.

When I joined the board in 1991, ‘the Halifax’ was the largest mortgage lender in the world. Its head office was still in the modest Yorkshire town of Halifax (which it now dominated), and most of the people who worked there had been born and brought up locally. The organisation – like the Marks & Spencer of that time – was a powerful illustration of how strong systems and culture can enable otherwise unremarkable people to do remarkable things. The contrast with Oxford University, which relied on the services of remarkable people but as an organisation was remarkable only for its ineptitude, was striking. I could not help noticing that even the most junior teller in the Halifax would use the pronoun ‘we’ in talking about the organisation, while in Oxford even the vice-chancellor would talk about ‘the University’ as though it were an organisation over which he had little real influence – which was perhaps true.

27: The Hollow Corporation

“Business is better understood by reference to the stage of industrialisation, which differs across the United States, China and Bangladesh, than it is through the language of capitalism and socialism.