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.

The business magazine Fortune published a list of the largest 500 US corporations in 1955 and has continued to do so annually ever since. The subsequent fate of the initial top ten provides a powerful rejoinder to the claim that large businesses acquire a scale that leaves them masters of their environment.

The Fortune 500 list did not include retailers. If companies had been ranked by sales, the list would have then been led by America’s three great shopping giants: Sears Roebuck, Montgomery Ward and JCPenney. Their fate was one of steady decline. In 2000, Montgomery Ward filed for bankruptcy. In 2019 Sears did the same and in 2020 JCPenney followed suit. The disappointing fortunes of these businesses are not the result of being in declining industries. Global demand for automobiles, food, oil, steel, chemical products and particularly electrical goods has continued to grow. Consumers still shop. But none of these 1955 companies is today the dominant firm in its industry. Cars are Toyota and Volkswagen; food is Nestlé; steel is ArcelorMittal, which took over much of the excess capacity located in the former Soviet Empire. Germany’s BASF is the world’s leading chemical company. And electricals – well, it depends on what you mean by electricals but, whoever you regard as market leader, it isn’t GE. Within America, cars are still General Motors – unless you look at market capitalisation and hence to Tesla. But food is PepsiCo and Tyson, steel is Nucor and Pfizer leads in chemicals. Retail is Walmart – and Amazon. Only ExxonMobil and some of the DuPont and GE subsidiaries remain among the global leaders in their fields.

23: The Finance Curse

“But between 1981, when Welch took control at GE, and 2005, when Lampert took control of Sears, a new approach to business developed. Managers like Sir Denys Henderson and Simon Marks, Alfred Sloan and Owen Young, had seen themselves as public figures with associated responsibilities to a wide range of constituencies. The generation that succeeded them had a narrower conception of their role. A successor generation of corporate executives paid close attention to quarterly reporting and the stock price.

Wealth is not equally, or even equitably, distributed, but it is more broadly distributed than in the past. To see a modern capitalist, perhaps you should go to the mirror in the home you own.