With school back in session, we can close the door on the summer of 2019: a summer with more heat than light, both literally and figuratively. Thanks to climate change, 2019 will probably go down as the hottest summer on record. And thanks to our elected leaders who aren’t doing anything about our hot planet, it was probably also the most hyperbolic.
The hyperbole on virtually all issues – now not only including higher education (from the right and left) but also workforce development in the form of apprenticeships – has become sickening and numbing. My new cynical coping mechanism is to view the shouting from both sides as no different than the single greatest example of hyperbole this summer, the introduction of Mustard Belt Champion Joey Chestnut at the Nathan’s 4th of July Hot Dog Eating Contest:
Introducing a man who stands where land meets horizon. Steadfast and unshakeable. A city on a hill lit for all to see. A poem written using every word of every language of every country in the world. He is a bead of light floating in the dark oil of night. For he is the very vessel of our freedom. The champion of the 4th of July. And he will fight until he’s the last man standing on the dirt-covered surface of the earth. For his cause is the cause of liberty. His cause is the cause of one nation, under God, indivisible. The #1 ranked eater in the world. 74 hot dogs and buns. The Nathan’s Famous Hot Dog eating champion of the world. JOEY CHESTNUT… He will bend time itself until history unfolds to his purpose. He has God’s user name and password and he does with it what he chooses. The rock on which he stands is not a rock. It is the United States of America. JOEY CHESTNUT !!!!!!
So at summer’s end, you can probably guess my reaction to the fact that an announcement from the Business Roundtable – an association of America’s largest companies – led to headlines so breathless they seem to have been “written using every word of every language of every country in the world” (as well as to the equally absurd statement from the author of the announcement, the CEO of Johnson & Johnson, that “there were times when I felt like Thomas Jefferson”). 181 top CEOs had agreed to “redefine the purpose of a corporation” to make social issues co-equal with returns to shareholders. Specifically, our largest employers committed to invest in their employees. “This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world.”
The idea that employers might take charge of the training, education, and career development of their employees isn’t as crazy as eating 74 hot dogs and buns in 10 minutes. After all, American employers have long assumed responsibility for the healthcare of their employees. And they’ve begun to demonstrate an interest in ensuring their employees complete degrees and aren’t burdened with student loan debt, even if only for parochial (i.e., retention purposes). So why not the full scope of human capital development as well? And if they do take charge, will America’s skills gap disappear in a puff of corporate smoke?
Another point of light is that the religion of returns to shareholders is only about as old as Nathan’s Hot Dog Eating Contest. It was less than 50 years ago that Milton Friedman began advocating that “the social responsibility of business is to increase its profits.” By the “Greed is Good” 1980s, this was widely accepted. And in the 1990s, it was codified by the Business Roundtable itself. As this timeframe marked the end of real income gains for middle class Americans – employees are like rock music in that they did much better before the 1980s – perhaps doing away with shareholder primacy can return us to the pre-Friedman days when more companies cared about taking care of their employees.
Friedman promulgated his doctrine to protect individual freedom and forestall collectivism. After all, when a corporate executive appropriates stockholder cash to fund social causes near and dear to his heart, is it very different from a dictator, benevolent or otherwise? But the real reason it took hold is that 1970s corporations weren’t particularly well-run. Think Mad Men, three-martini lunches, and corporate golf club memberships. At a time of bloated conglomerates, profit maximization was a good starting point for efficiency and accountability.
I don’t agree with Senator Bernie Sanders on many things, but his reaction to the Business Roundtable announcement was spot on: “I don’t believe what they’re saying for a moment.” And while his logic involved their failure to support raising the minimum wage and equitable tax reform, I’ll keep it on more comfortable terrain for the 181 CEOs: another member of the pantheon of corporate philosophers, Peter Drucker. Drucker supposedly originated “What gets measured gets managed” – now a modern management aphorism. And few things are as rigorously measured and scrutinized as earnings per share (EPS). Said Friedman in his seminal 1970 New York Times Magazine article when it comes to profit maximization for shareholders, “at least the criterion of performance is straight-forward.”
Contrast EPS with employee human capital development, a concept more dynamic than static and which involves building competencies and achieving career goals. Employee learning and development is extremely hard to measure for a particular period or point in time and couldn’t be more complex – the opposite of the clear metric most executives require in order to focus and manage.
Business Roundtable CEOs would have greater credibility if their “Thomas Jefferson” had penned a commitment to establish clear metrics for employee human capital development. Of course doing so will probably require a People Analytics Revolution to even determine the variables. And it’s not surprising that in a world where one third of frontline employees receive zero formal training and where less than half of employees believe employers care about improving the employee experience, the once vaunted People Analytics Revolution is taking a lot longer than expected.
With this background and no lip service (let alone a commitment) to establishing metrics, any celebration of the Business Roundtable statement is like spiking the football on the 50 yard line. As another Friedman, Professor David Friedman of Willamette Law School, remarked to me last week, the fact that the Business Roundtable made this statement simply underscores that they are putting shareholders first, “because it makes shareholders feel better.”
There is some reason for hope here. Unlike the pet charitable causes of executives which so concerned Milton Friedman, employees are a defined constituency. So it’s likely that degree completion, student loan reimbursement and other mutually beneficial employee benefits will continue to gain momentum, although as Sean Gallagher of Northeastern points out, the percentage of employers that provide tuition assistance benefits has declined from 79% in 2002 to 56% in 2019.
What’s not realistic is to believe that any announcement – no matter how well written – will make the learning and development of employees a top priority for employers. The real problem is that decision makers at large public companies won’t be reading this, or any coverage of their supposed Declaration of Independence from profit maximization. They’ve moved on to more pressing problems, like planning for their Q3 earnings call with analysts and investors. And when the next recession hits, training will be the first budget to be cut, as it always has.
In conclusion, if you think a statement from the Business Roundtable changes anything without a clear idea of how to measure the human capital development of employees, then come meet me in the New York borough where Nathan’s runs its Hot Dog Eating Contest, because there’s a bridge I’d like to sell you.