Reviews
Supercapitalism: The Transformation
Revolt in the Boardroom:
The New Rules of Power in Corporate America
Alan Murray
(Collins, 2007)
If you’re an American CEO, who’s your boss? If you answer “The
board – and it’s breathing down my neck,” you’re in good company.
That’s the premise behind a provocative book by Wall Street Journal
reporter Alan Murray. Murray, a former Washington correspondent,
analyzes current corporate governance and finds that it has much in
common with the power struggles he wrote about on his previous beat.
Murray frames his engagingly written
book as an update on the tensions laid out
by Adolf Berle and Gardiner Means’s 1932
classic The Modern Corporation and Private
Property. Berle and Means explained that
with the rise of mass stock ownership, inves-
tor oversight was too diffuse to keep manag-
ers accountable. They argued that managers,
like anyone else with enormous power and
few restraints, would inevitably abuse their
positions.
As Murray tells the story, New Deal regula-
tion and union power kept American execu-
tives in check for a few decades. But as those pressures waned in the
1980s and 1990s, and companies gained public prestige, executives
flexed their muscles. Now, after a string of managerial abuses, govern-
ments have reasserted themselves and newly emboldened financial
institutions have intervened.
Three recent forced resignations of CEOs set the stage for the
book: Carly Fiorina at Hewlett-Packard, Harry Stonecipher at Boeing,
and Hank Greenberg at American International Group. Murray argues
persuasively that if their troubles had happened a decade ago, these
executives would have kept their jobs. What changed, he says, is that
personal liability, outside regulators, and aggressive investment funds
have forced boards of directors to step in. Reluctantly, boards are now
acting as real checks on managerial behavior.
The most interesting part of the book involves the identity of boards.
Now able to meet without the CEO, having key oversight functions,
and including fewer active CEOs in their midst, boards are taking on a
life of their own. A good deal of evidence suggests that directors are
showing no special loyalty to regular shareholders (they still pay CEOs
as much as ever). And boards are hardly monolithic: A dramatic chapter
on the infamous leak investigation at HP shows deep divisions among
the company’s independent directors. Clearly, directors must respect
the growing outside pressures on corporations. But where do their own
interests lie?
That question is all the more pertinent in light of the challenge thrown
out by a number of departed CEOs whom Murray interviewed: At what
point does board oversight become so active that it undermines mana-
gerial decisions and corporate flexibility?
– John T. Landry
34 Harvard Business Review | September 2007 | hbr.org
1454 Sep07_Forethought.indd 34
of Business, Democracy, and Everyday Life
Robert B. Reich
(Knopf, 2007)
Just as corporate social responsibility is going main-
stream, here’s a powerful liberal argument that it
is now, and can never be more than, a sham. Reich,
a former U.S. labor secretary and now a professor
of public policy at Berkeley, says that hypercompeti-
tion and the triumph of commercial values have
made it practically impossible for companies to pur-
sue social needs that don’t pay off on the bottom
line. Companies that go against marketplace forces
(as Merck did in preventing river blindness) do so at
best as an incidental add-on to their fundamental
strategy of having profits drive the business (which
led Merck to heavily market Vioxx). Soulless cor-
porations, Reich says, should never be expected to
address problems beyond their value chain – only
citizens and governments can effectively address
social challenges. The argument has some holes –
if competition is so fierce, why are companies
seeing record profits? – but it’s an engaging and
insightful account.
The Clean Tech Revolution: The Next
Big Growth and Investment Opportunity
Ron Pernick and Clint Wilder
(Collins, 2007)
Technologies that minimize environmental harm
are big business with a big question mark. How
much of the current demand is due to social
concerns – and therefore susceptible to the chang-
ing whims of governments and consumers – and
how much to hard improvements that render these
technologies competitive with existing practices?
Everyone may accept the urgency of staving off
global warming, for example, but the actual social
and regulatory pressures to reduce carbon emis-
sions will fluctuate, making business calculations
difficult. Pernick and Wilder, researchers and
publishers in this area, offer an accessible and de-
tailed survey of the major technologies and players.
Although technologies are improving quickly, the
authors acknowledge that the social concerns are
still an enormous factor in their acceptance; even
wind power use varies heavily depending on tax
credits. Yet they effectively argue that conventional
fuel sources and consumption also benefit from
a complex array of subsidies. Rather than being an
external factor, social concerns are baked into
the industry.
– John T. Landry
8/1/07 7:31:19 PM