Zero Historical Perspective in Press Coverage of the Business Roundtable Statement

20 08 2019

The Business Roundtable, which represents the chief executive officers of the major U.S. corporations, has issued a statement that explicitly denounces the doctrine of shareholder primacy, the view that executives should run companies with the sole goal of maximizing shareholder value (see here, here, and here). This view as famously articulated by the Michigan Supreme Court in the case of Dodge Brothers vs Ford (1919) and much later by Milton Friedman. The Business Roundtable’s statement calls for a new understanding of the “purpose of a corporation” for managers to balance the interests of shareholders with stakeholders who have competing claims on the firm’s resources, e.g., the workers and perhaps the nation-state.  The Business Roundtable seems to want to turn the clock back to the immediate postwar period, when U.S. business culture was such that many U.S. managers explicitly rejected the notion that their job was simply to maximize profits for shareholders.

If the ideas in the Business Roundtable’s statement are implemented in all or many of the member organizations (that’s a big if), the implications for U.S. business, society, and investors would be massive. Not surprisingly, the Business Roundtable’s announcement has received extensive press coverage. I’ve done research on the history of the doctrine of shareholder primacy in US business. My research, and that of other scholars such as Brian Cheffins, has shown how the pendulum swung from shareholder primacy to the “managerialist” philosophy that dominated U.S. business-decision in the middle of the twentieth century and then back again to shareholder primacy in the 1980s and 1990s. I’m therefore struck by how little awareness of this complex history is demonstrated in much of the press coverage of the Business Roundtable’s statement. There is basically zero historical perspective in the media discussion of the Business Roundtable statement.

Consider the otherwise fine report about the  Business Roundtable event on CNBC by journalist Maggie Fitzgerald. Her story referred to the “age-old” doctrine of shareholder primacy, which implies that ever since the advent of the joint-stock company, firms everywhere and always have been run according to the dictates of shareholder value ideology. That’s not remotely true in Germany or even in other common-law jurisdictions such as the UK and Canada, where the law requires manages firms in the interest of an imagined “enlightened” and socially conscious shareholder (for information on the Englightened Shareholder Value principle in the Commonwealth countries, see here, here, and here). Moreover, historical research by the late Lynn Stout, Rakesh Khurana, Roger Martin, and other academic has demonstrated that shareholder value ideology was explicitly rejected by US managers from the 1930s to the late 1970s. This literature is discussed on page 536 of a paper I wrote with Jason Russell and Kevin Tennent. Ms. Fitzgerald, like most US journalists, appears to be unaware of how recently shareholder value doctrine came to dominate the thinking and action of top US CEOs.  





The Shadow of History, Business and the Hong Kong Protests

16 08 2019

The Chinese government blames the pro-democracy movement in China on sinister Western interests. The ongoing disturbances in Hong Kong have created significant political risks for Western firms in the SAR and in mainland China. The disturbances, which threaten to exacerbate the growing rift between China and the West (think of the Trump Trade War, President Xi’s more assertive foreign policy, the Chinese naval build-up), have created additional challenges for the executives of Western firms in Greater China. The decision of HSBC to fire CEO John Flint has to be understood in this context, since once of reasons that have been given for his dismissal were connected to the new geopolitical environment, at least according to a report in The Guardian.

Historical research can shed some light on these developments. I recently published a business-historical paper in Enterprise and Society that examines the Western firms that operated in China during the treaty-port period, the era after the Opium Wars when China was forcibly opened to Western commerce. The Chinese Communist Party’s ongoing “patriotic education” program has sought to keep memories of this period alive. The Party does so by creating historical narratives that emphasize the sheer extent to which racist and colonialist Westerners mistreated China during the so-called “century of humiliation.” This historical narrative is particularly problematic for the firms that can trace their origins back to this period (HSBC, Jardine Matheson, the Swire Group), since it creates an association in the minds of Chinese people between these companies and the Western powers’ terrible treatment of China in the 19th century. Cathay Pacific has been bashed in the pro-Beijing media for its alleged lack of enthusiasm for punishing employees in China who support the pro-democracy movement. As reporter Tom Mitchell informs us in the Financial Times,  it is not surprising that Cathay and its parent, the Swire Group, have been attacked during this crisis, since “Swire, alongside Jardine Matheson, is one of two British trading groups established in Hong Kong during the 19th century.”

To my mind, Mitchell’s report is a reminder that firm’s reputations in the present can be affected by events long ago in their history, a phenomenon  that has been discussed by Judith Schrempf-Stirling and her colleagues in an important Academy of Management Review paper (see here).

 





Management Learning in Historical Perspective: Rediscovering Rowntree and the British Interwar Management Movement

6 08 2019
I would like to draw the attention of my readers to a superb new business-historical paper that has appeared in Academy of Management Learning & Education.  The paper Mairi Maclean, Gareth Shaw, Charles Harvey and Alan Booth develops our understanding of the history of management education at the same time as addressing a classic debate in the field of business that was initiated by the late Al Chandler’s remarks about the role of education in the relative decline of British industry.

Abstract: British interwar management (1918-1939) has been criticized as overly conservative, comprising a core of progressive firms amidst a mass of conservatively-run, family-dominated businesses. According to the dominant narrative, British firms exhibited little interest in new managerial approaches. Our study of the Rowntree business lectures and British interwar management movement challenges this view; suggesting British managers displayed greater openness to innovation than is commonly recognized. We uncover and analyse a network of British firms engaged in management education through organized peer-to-peer communication, facilitated by lectures and management research groups initiated by Seebohm Rowntree. Our primary contribution to the literature is to offer a more nuanced perspective on the evolution of British management learning in the interwar years. This reveals dynamic knowledge networks reflexively engaged in advancing and codifying practice-based learning to promote the diffusion of effective solutions to shared problems – building communities of practice, codifying management knowledge, and drawing on an ethos of ‘business as service’. By undertaking archival research to create a coherent body of documentary material, and making this available to others, we also make a methodological contribution, creating a new ‘space’ for future researchers to explore, from which they can write new management histories of their own.

 

One of the many great things about this paper is that the authors have adopted a variant of the Open Data principle and have shared the data (i.e., the historical documents on which the paper is based) in an online repository. I have long advocated the adoption of Open Data as a norm in the field of business history (see our paper on the subject in Business History) and I am thus very pleased to see this principle being applied here in such an excellent way. Check out all of the historical sources on the companion website for this paper, which can be found here.





The Library of Mistakes

25 07 2019

 

There is increasing interest in business schools in History-as-Sensemaking (i.e., the use of history by business people to understand the present and plan for the future). Indeed, this issue was discussed extensively at the recent EGOS conference in Edinburgh. Edinburgh is the site of a fascinating institution, the Library of Mistakes, which serves to make information about financial, economic, and business history available to businesspeople, especially those who are active in Edinburgh’s important investment management cluster. The Library of Mistakes is a  Scottish charity (registered charity SC040205) founded to promote the study of financial history. According to the BBC, it maintains a small but excellent library in Edinburgh that hosts talks by experts.

The company associated with the Library of Mistakes, Didasko Education Ltd, supports the teaching of a course called the Practical History of Financial Markets, which forms a unit of the Edinburgh Business School MBA programme.  The course is also taught at a private venue in London and at a business school in India.  According to a filing with Companies House, most of the people who take the course are professional fund managers. I had quick look at the teaching schedule of the upcoming course in London (31 October to 2 November 2019) and it looks fantastic.

The Library’s mission statement declares that

In recent years financial education has focused on the power of the equation to explain economic and financial forces. This distillation of complex forces into faux objectivity has created dangerous errors in financial understanding… The Library of Mistakes exists to allow students, professionals and members of the general public to study financial history to understand how finance has worked, rather than how it should work if key unrealistic assumptions are made.

 

 





Problems with the New Google Scholar Metrics

22 07 2019

The new Google Scholar Journal metrics are out and have generated a great deal of discussing on Academic Twitter. I’m writing this blog post to suggest that there may be serious methodological problems in Google’s rankings of academic journals.

Here are the top-ranked journal in the field of Business, Economics, and Management (BEM). The numbers are the h5-index and the h5-median.

 

1. American Economic Review 147 229
2. Journal of Financial Economics 112 164
3. The Journal of Finance 108 181
4. The Quarterly Journal of Economics 104 189
5. Journal of Business Ethics 98 131
6. Journal of Business Research 96 131
7. The Review of Financial Studies 94 140
8. Tourism Management 94 139
9. Management Science 91 124
10. Strategic Management Journal 90 123
11. International Journal of Production Economics 89 126
12. Journal of Management 88 146
13. Academy of Management Journal 86 129
14. World Development 84 116
15. International Journal of Project Management 79 105
16. Journal of Economic Perspectives 77 140
17. Econometrica 75 125
18. Energy Economics 75 90
19. Technological Forecasting and Social Change 74 96
20. Journal of Political Economy 73 131

There are no major surprises in Google’s rankings of the top journals in the general field of BEM, which makes Google’s ranking system seem fairly credibly to me. Within the BEM field, Google ranks journals by subcategory. Here are the rankings for Economic History. As you can see, the Review of Keynesian Economics was absurdly categorized as an economic history journal, which strongly suggests to me that the ranking and categorization decision was made by either a non-academic who didn’t bother speaking to academics in the field, or some automatic system. Either way, the credibility of the entire ranking system is reduced, at least in my eyes. If Google’s journal categorization system is flawed for the subdiscipline I know best, it makes me suspect there are other dubious decisions lurking elsewhere in the system.

 

My point is that we should use extreme caution when thinking about these new rankings. We should also ask some tough questions about the procedure used to create them.

 

Publication h5-index h5-median
1. The Journal of Economic History 28 48
2. The Economic History Review 22 27
3. Business History 20 29
4. Explorations in Economic History 20 27
5. Review of Keynesian Economics 18 23
6. European Review of Economic History 16 20
7. History of Political Economy 16 18
8. The European Journal of the History of Economic Thought 13 19
9. Accounting History 12 14
10. Journal of the History of Economic Thought 11 17




Entrepreneurship and History

16 07 2019

I’m going to be taking part in a PDW on entrepreneurship and history at this year’s Academy of Management conference. The workshop will be held on Friday, August 9 from 12-2 PM at the Boston Marriott Copley Place. Here is a link to the program with the details of the PDW.

I may be arriving a little bit late because I’m also taking part in a workshop on family business history that goes until 12:45 in an adjoining room of the hotel (see details here).

12:00 PM Introduction, Trevor Israelsen  
12:05 PM Historical methods and entrepreneurship research

   Daniel Raff, Historical explanation, causality, and firm- and

history emergence

   David Kirsch, Identifying research questions in

entrepreneurship that history can answer

   R. Daniel Wadhwani, The design of historical research

Question 1

What constitutes rigorous historical research in the context of entrepreneurship?

12:20 PM Audience questions to expert panel on historical methods  
12:35 PM The role of history in entrepreneurial processes

Rob Mitchell, Entrepreneurial processes and the role of the past

   Andrew Smith, Historical-analogic reasoning: The

impress of the past on entrepreneurial cognition

Ricardo Zózimo, The constitutive role of history in entrepreneurial

processes

   Christina Lubinski, History and the uses and value of technological

innovations

Question 2

What is the relationship between history and ongoing entrepreneurial processes?

1:05 PM Audience questions to expert panel on entrepreneurial processes  
1:20 PM Roundtable discussions with experts

Introductions in small groups around tables

Research questions activity

Sharing and refining research questions and ideas to address

these two core questions

Answers

What research questions and ideas can address these two core questions?

1:55-2 PM Conclusion, Trevor Israelsen  




AOM PDW “Rediscovering family business history”

16 07 2019

I’m really looking forward to being part of a PDW “Rediscovering family business history: Bridging the gaps in family business, business history, and organization theory” that will be taking place at this year’s Academy of Management Conference in Boston. The PDW will be taking place Friday, 9 Aug 9 2019, 10:45AM – 12:45PM (Boston Marriott Copley Place/ Simmons).

Round table 1

Mentees Title of the paper Mentors as discussants
Murphree, Michael

(Assistant Professor, Sonoco International Business Department

Darla Moore School of Business, USA)

Up or Out: The Crisis and Future of Taiwanese Family Businesses Roy Suddaby (University of Victoria, Canada)
Nicholas Wong (Senior Research Assistant, Newcastle Business School, UK),

Andrew Smith (Senior Lecturer in International Business, University of Liverpool),

Allan Discua Cruz (Lecturer in Entrepreneurship, Lancaster University) &

Nicholas Burton (Senior Lecturer, Newcastle Business School, UK)

Explaining the Enduring Success of Rathbones: Harnessing the Evolution of Religion Theory

 

(Full paper received)

 

 

Mattias Nordqvist  (Jönköping University, Sweden)

 

Round table 2

Mentees Title of the paper Mentors as discussants
Anup Banerjee

(PhD candidate, Jönköping International Business School (JIBS), Sweden)

The chairperson of the board in family firms: An exploratory study on the Swedish context

 

Isabelle Le Breton-Miller (HEC Montréal)
Bruno Noisette

(PhD candidate, Management and entrepreneurship

ESSEC Business School, Paris, France)

On the durable influence of pre-colonial family structures on business development in East-Africa

 

María Fernández-Moya

(Colegio U. de Estudios Financieros, Spain)

Christina Lubinski

(Associate Professor, Department of Management, Politics and Philosophy, Copenhagen Business School, Denmark) &

William B. Gartner

(Professor, Entrepreneurship Division, Babson College, USA)

History as a Source and Method for Family Business Research

 

(Full paper received)

 

Danny Miller (HEC Montréal)