CHAPTER 10
The Worthiness Era

The forces we’ve sketched out in this book dovetail with other key, emerging business trends—all of which are converging to create a future in which companies increasingly must prove they are worthy of consumers’ business, employees’ best efforts, and investors’ dollars. The growing importance of organizational agility and the rise of Asia as an economic power have worked against the arrival of the Worthiness Era. But in both cases, factors in play are now propelling company goodness to the fore.

The stakes are high that companies take goodness to heart in the coming years. Without better stewardship of communities and the environment, humanity will continue on the path toward climatic disaster. Without better employer practices, millions of people will suffer unnecessarily in dissatisfying, anxiety-producing jobs. And without increased worthiness as sellers, companies will continue to sell products and services that too often harm customers physically and financially. The degree to which the Worthiness Era takes hold also has implications for the future of capitalism and America’s prosperity in the years ahead.

Partly because the stakes are so high, we see a role for governments to help shepherd in the Worthiness Era. Market forces are the main engines pushing companies in the direction of goodness. But governments also have a role to play in ensuring that worthiness rules the day through new laws on disclosures and better enforcement of regulations to deter bad behavior.

This chapter explores each of these themes to paint a fuller picture of the Worthiness Era, why it is important, and what public officials can do to help bring it about.

Worthiness Meets the Agile Organization and Emergent Asia

Among the most important trends shaping the business world are (1) the pressure organizations face to become more agile in their operations and (2) the emergence of China, India, and other Asian nations as economic powerhouses. In the past, both of these developments have corresponded with less-than-admirable behavior by businesses. But, as we shall see, worthiness is at work in both cases, making them complementary if not reinforcing factors with respect to the shift to greater company goodness.

THE AGILE ORGANIZATION

Business agility refers to an organization’s decision-making speed. An agile organization is able to alter strategy, change operations, develop new products, and get them to market quickly. Agility has been a watchword for a decade or so as the pace of business has picked up amid more global competition and technological advances such as sophisticated supply-chain management tools.

So far, companies have sought to increase their agility largely by slimming down. They have outsourced aspects of their operations, such as information technology, human resources, and finance and accounting. They have aimed to concentrate on their core competencies and limit fixed costs.

Companies also have tried to bring the lean philosophy to their labor force. Besides eliminating employees through the outsourcing of business functions, companies have ramped up their use of contingent workers, including part-time employees, independent contractors, and agency temps. The number of paid employees at temporary help services firms in the United States climbed 27 percent from 2002 to 2007 to 3 million. By contrast, total nonfarm employment in the United States rose just 6 percent from December 2002 to December 2007 to 138 million.¹ In 2010, Bloomberg Businessweek estimated that 26 percent of Americans have nonstandard jobs, including part-time employment, independent contractors, and temps.²

The recession reinforced the business push to trim back. Not only did companies lay off millions of workers but also the bulk of U.S.-based firms said they expected a long-term decrease in staff size.³

Up to now, many corporate agility efforts have worked in opposition to worthiness. A focus on becoming leaner has lent itself to a short-term mindset and transactional, zero-sum relationships—to practices such as short-staffing stores to save costs at the expense of customer service. And the corporate obsession with shrinking has led to greater job instability for workers, which has contributed to record job dissatisfaction and sagging employee engagement in the United States.

But the agility story has a sunny side as well. It’s becoming clear that true agility isn’t defined simply by cutbacks—by seeking to be as unencumbered as possible. At some point, a preoccupation with paring back becomes organizational anorexia. Overly skinny firms are both weak and slow. For example, some of the companies that outsourced their HR operations several years ago, expecting they could wash their hands of personnel matters entirely, found themselves stuck in troubled contracts.⁴ Companies and vendors underestimated the complexity of the tasks involved. Similarly, the practice of pitting manufacturing suppliers against each other has backfired for companies in the form of product or labor problems, as scandals at Mattel and Apple indicate.

What’s more, layoffs often leave unproductive workforces in their wake, as remaining employees wrestle with survivors’ guilt, worry about their own fate, and struggle to figure out how to juggle additional tasks. Management professor Wayne Cascio has documented the way pink slips frequently fail to pay off for companies. “Studies have tracked the performance of downsizing firms versus non-downsizing firms for as long as nine years after a downsizing event,” Cascio wrote in a 2009 report. “The findings: As a group, the downsizers never outperform the non-downsizers”⁵ (emphasis in the original).

The ability to move fast, companies are learning, involves both weight and strength. And strength has to do with beefing up rather than breaking down connections with workers, suppliers, and customers. To be sure, companies can grow fat and bureaucratic. Some streamlining of workers and processes may be needed. But quickness also has to do with reciprocity and trust. As consultant Stephen M.R. Covey has pointed out, lower trust taxes a firm through lower speed and higher cost.⁶ And a growing field of research is highlighting the power of the connected enterprise—meaning companies with active, decentralized networks of communication and healthy relationships within their walls as well as with external parties such as suppliers and customers.⁷

Companies have started to move toward greater connectivity and stronger ties. HR outsourcing deals now focus more on creating partnerships with frequent interaction between company and service provider.⁸ In general, businesses have moved toward selecting preferred vendors with whom they have deeper relationships. Those bonds, in turn, offer greater odds that final products will be safe and environmentally sound. And after years of trying to minimize customer service costs through skimpy staffing levels, outsourcing, or a focus on minimizing time on the phone, companies like Home Depot and American Express are investing in thicker ties with customers—which can lead not only to heightened loyalty but also better real-time feedback.

There also are signs agility can mesh with goodness as an employer. Internet retailer Zappos, for example, grew to top $1 billion in sales in less than a decade with a philosophy of company as a tight-knit community. While many companies have outsourced janitorial services, Zappos brought their janitors back in-house to stay true to this vision. By trusting employees to do the right thing, the Zappos team is able to make changes on the fly, whether that means a merchandise buyer jumping on a new shoe style or a customer service agent addressing a shopper’s unique problem.

The fact that so many workers want job security these days, and that top performers in particular want it, all but forces companies to offer a degree of employment stability. Showing workers they won’t be tossed overboard at the first sign of trouble and helping them to safeguard their employability through training and career development help will improve employee engagement. And workers who are engaged—and marshaled intelligently toward company aims—are likely to boost a company’s speed of business by giving their best efforts.

Outsourcing is unlikely to go away as an agility strategy, but it isn’t incompatible with worthiness. Closer ties between companies and their suppliers offer the promise of more enlightened treatment of workers. Some major companies, in fact, are starting to act more and more like the HR departments of their suppliers. Look at FedEx and its network of global service providers, which helps the delivery company in countries where it does not have on-the-ground presence. FedEx sends instructors around the world to train those suppliers in skills and leadership and also offers them training online.⁹

Consider Apple and its manufacturing suppliers. Scrutiny of working conditions in its supply chain has led Apple to get increasingly involved in the way those firms treat employees. It has issued detailed clarifying standards on topics such as dormitories, medical nondiscrimination, and juvenile worker protections—in one case specifying that employees under 18 cannot work at heights in excess of two meters. It launched a social-responsibility training program, through which more than 300,000 workers have received instruction on worker rights and local labor laws. And working with one supplier, Apple started offering workers computer-based training, including associate degree programs linked to three universities.¹⁰

Apple’s suppliers up to now have had a very mixed record on labor issues. But some of the firms providing outsourcing services have proven to be among the most decent and inspiring employers in the world. Outsourcers such as HCL Technologies are keenly aware that the engagement of their workforce determines the level of quality they give to clients.¹¹

Even if we move in the future to a radically decentralized economy of individual free agents and ad hoc teams, elements of worthiness will persist. The reputation of organizations will matter a great deal. Akin to the way eBay sellers must maintain a good track record if they hope to keep making deals, there will likely be mechanisms for rating the trustworthiness of companies—no matter how small. Companies that don’t treat contractors fairly and generously, that don’t pursue reciprocal relationships, will not attract the best talent. Nor will they inspire people to give their best.

RISE OF ASIA

India and China are becoming economic powers in the 21st century.

China’s share of world economic output rose from 3.6 percent in 1990 to 11.4 percent in 2008 and is expected by the International Monetary Fund to jump to 16.9 percent by 2015. India, for its part, accounted for 2.8 percent of global economic output in 1990. That figure jumped to 4.7 percent in 2008 and is projected to climb to 6.1 percent in 2015.¹² Together, then, China and India’s share of world economic output was just 6.4 percent in 1990 but is expected to soar to nearly a quarter of global production by 2015.

Much of Asia’s economic activity over the past few decades has concentrated on manufacturing. And much of that factory work has been plagued by poor working conditions. Especially in countries with authoritarian governments like China and Vietnam, basic labor rights such as the freedom to form independent trade unions are lacking.¹³ In addition, factories operating in Asia often have had few pollution controls amid weak environmental regulation regimes.

In many cases, multinational corporations have taken advantage of cheap labor, substandard worker protections, minimal product safety regulations, and limited environmental protections in Asia. The standard defense by such firms is that their presence in developing nations helps such countries move toward greater human rights and a higher standard of living. To be sure, a more capitalist, Western-welcoming Asia has lifted millions from dire poverty. But fundamental labor protections remain missing, and workers continue to suffer from harsh conditions, especially at third-party suppliers to Western brands. And too often, Asian operations have generated hazardous products at significant environmental cost.

In this sense, Asia’s rise could be said to have been a net contributor to bad company behavior. There’s the potential for much more unworthiness. Perhaps most alarming is the prospect that billions of consumers in China, India, and other parts of Asia will start generating as much greenhouse gas through cars and other products as Western consumers, catered to by companies more interested in short-term sales and profits than long-term prevention of climate catastrophe.

But the Asian equation is starting to change. The region’s economic emergence is beginning to become more of a force for good. In the first place, industry codes of conduct are maturing and having more influence. Partly because activists are holding companies’ feet to the fire, firms increasingly have to demonstrate that they and their supplier networks abide by labor and environmental standards.

There’s also homegrown momentum for company goodness in Asia. A series of Chinese labor strikes in 2010 suggest lower-skilled Chinese employees are increasingly unwilling to accept unworthy wages or working conditions.¹⁴ In addition, a new generation of managers and executives is coming of age in China and India with promising attitudes. Although China’s rapid growth has led to a shortage of skilled managerial talent in some quarters, many young and middle-aged leaders in China are seeking to combine the best of Western and Eastern thinking.

Ed met some of these leaders in the course of a reporting trip to China a few years ago. Among them was Angel Yu, then vice president for human resources and administration at Adidas for mainland China, Hong Kong, and Taiwan. Yu represented the entrepreneurial spirit unleashed by Deng Xiaoping in the late 1970s. Early in the market reform period, Yu left a fairly stable teaching post to pursue her fortune in the free-trade zone set up in Shenzhen. A series of career advances led to her post at Adidas, where she had significant responsibility over the multinational clothing company’s Asian operations. She also earned an office with commanding views from the 32nd floor of a Shanghai skyscraper.¹⁵

Ed asked Yu for her thoughts about how Western and Chinese principles can be combined in leaders. She boiled it down to a simple phrase: “Balance ‘performance culture’ and ‘family-oriented culture.’”¹⁶

Taken seriously, that pairing would mean economic progress that expands opportunities and standards of living—the best of the West, as it were. But it would also draw upon the Eastern attention to harmony and personal relationships that ideally would mean leaving no one behind.

A better way to lead businesses also is brewing in India. Earlier in the book we highlighted HCL Technologies CEO Vineet Nayar, who emphasized employee empowerment and transparency from the top. He’s not the only Indian executive working on worthier management styles. A 2010 article in the Harvard Business Review based on interviews with executives at 98 of the largest India-based companies concluded there is a “distinctive Indian model” of leadership centered on investing in employees.

“Far more than their Western counterparts, these leaders and their organizations take a long-term, internally focused view,” the authors wrote. “They work to create a sense of social mission that is served when the business succeeds. They make aggressive investments in employee development, despite tight labor markets and widespread job-hopping. And they strive for a high level of employee engagement and openness.”¹⁷

As leaders in China and India are moving in the direction of goodness, employees in Asia are seeking holistically worthy employers. A 2008 survey by the Nielsen Company found that more than in any other region in the world, people in the Asia/Pacific region ranked work/life balance as their biggest concern.¹⁸

“The bottom line for employees is that they are looking for something more than compensation,” Aon Consulting said in a 2008 report about the Asian workforce. “Stimulating jobs and promotion opportunities top their lists, as well as enlightened leadership and an excellent work environment.”¹⁹

Asian consumers, for their part, also are pushing companies toward greater worthiness. As mentioned earlier, 84 percent of consumers in China, India, Malaysia, and Singapore say they would accept a higher price for a green product, compared with 50 percent in the United States, Japan, France, and Germany.²⁰ The greater greenness may have something to do with the way global warming and rising seas pose a particular threat to Southeast Asia, with its heavy concentration of population near coastal areas.²¹

In addition, Asian governments are poised to be a force for company goodness. Although China and India have butted heads with developing nations about how to hammer out an accord for combating climate change, their insistence on an accord that fairly allocates the carbon space countries can take up in the future represents a long-term view.²² Moreover, both the Indian and Chinese governments have been encouraging clean tech through tax policy and other measures.²³ China led the world in clean energy investments in 2009 for the first time, according to a study by the Pew Environment Group.²⁴

And as mentioned earlier, China passed a law in 2008 strengthening worker rights. The country’s leaders have stressed the need to blend economic growth with social harmony.

A focus on societal success, whether by top Chinese politicians or business people like Angel Yu and Vineet Nayar, undermines bad company behavior. As the tiger and dragon leap onto the world stage, it’s unlikely they will fight the emergence of the Worthiness Era. Over time, they are more likely to serve as guardians of company goodness.

The Stakes Are High That Worthiness Wins

The stakes are high that goodness prevails among companies.

In the first place, better company stewardship of the environment is critical to avoiding climatic catastrophe. The long-term threats posed by global warming include millions more people facing coastal flooding each year; higher death rates from heat waves, floods, and droughts; and increasing risk of extinction for up to 30 percent of species.²⁵

According to the Intergovernmental Panel on Climate Change, global greenhouse gas emissions due to human activities rose 70 percent between 1970 and 2004, with the largest growth coming from energy supply, transport, and industry.²⁶

Companies alone cannot stave off global warming and its apocalyptic possibilities. But businesses clearly play a major role in shaping the environmental future. While governments and global policy bodies can get bogged down in climate negotiations—witness the limited results of the Copenhagen talks—companies can take swift steps. And though the actions of any one individual are small, company environmental efforts can be big—as we are seeing with Walmart’s green campaign.

Still, without a shift to sincere stewardship, we can expect more greenwashing instead of green-worthy behavior. More Gulf oil spills, energy-hungry products, and carbon-intensive supply chains. With poor stewardship, in other words, businesses will push our planet over the ecological edge. Companies acting as good stewards, on the other hand, could lead us on the path of true sustainability.

Besides warding off environmental ruin, company worthiness is vital to the well-being of billions of workers. At a basic level, fundamental rights such as freedom from forced labor, safe workplaces, and the ability to bargain collectively will be honored to a much greater extent when good employers are the norm. Such rights remain a real concern for many of the world’s 3 billion workers.²⁷ The International Labour Organization estimates that about 2.3 million people die from work-related accidents and diseases each year, including close to 360,000 fatal accidents.²⁸

On one end of the spectrum, some workers merely survive their jobs, but at the other end are workers thriving because of their jobs. Paychecks and health benefits can allow workers to take care of themselves and their families. Challenging projects and career progress can lead to great personal satisfaction. Inspiring company missions and accomplishments can help make life meaningful.

Scholars James O’Toole and Edward Lawler III define good work as employment that satisfies three major human needs: “(1) the need for the basic economic resources and security essential to lead good lives; (2) the need to do meaningful work and the opportunity to grow and develop as a person; and (3) the need for supportive social relationships.”²⁹

But in their comprehensive study of the American workplace published in 2006, The New American Workplace, Lawler and O’Toole found too little good work in the country. “Flexible working hours, company-sponsored tuition reimbursement, benefits for part-timers, employee participation in decision making and profit sharing, the redesigning of jobs to make them challenging, and the providing of on-the-job developmental opportunities all seem to have positive effects on worker productivity and job satisfaction but are not widely used,” O’Toole and Lawler wrote.³⁰

Worthiness also matters when it comes to consumers. Despite the “quality is job one” mantra of the past few decades, many companies have fallen short of the good seller standard. Massive recalls of toys and other products shook consumer confidence in 2007. And safety problems weren’t isolated to that year.³¹

Much of the blame for product safety issues relates to poor design. Another factor is the ever-more global supply chain, with links in countries with less regulation than in the United States.³² Unless firms hew to high standards of quality and safety, products emerging from their global operations risk harming consumers the world over.

Health hazards facing consumers extend to the food supply. Each year, about 76 million people contract a food-borne illness in the United States, with about 325,000 requiring hospitalization and some 5,000 dying.³³ Of course, not all of those cases can be pinned on bad company behavior. But businesses share some of the blame, as evidenced by recent outbreaks of salmonella in peanut butter and E. coli in spinach.

Unscrupulous selling practices hurt consumers not only in the gut but the pocketbook as well. The U.S. housing boom, for instance, was rife with ethically dubious behavior by businesses, such as steering people into unfavorable mortgages and betting against clients through mortgage-backed securities. And collectively, the shortsighted actions of financial services firms helped trigger a recession that has left much of the world worse off.

A broad shift of companies to become good sellers will result in safer products, healthier finances, and greater peace of mind for people throughout the globe.

In fact, without greater goodness, companies may find the global populace increasingly opposed to capitalism itself. Yes, the end of the Cold War seemed to signal capitalism’s victory over communism. But amid recurring mistreatment of workers, communities, consumers, and investors by corporations, the model of private-sector companies pursuing their interests in largely unfettered markets is under fire.

The Great Recession especially seemed to prompt suspicion about laissez-faire economics. As noted in Chapters 2 and 4, recent global polls have shown widespread dissatisfaction with capitalism and support for more government regulation.³⁴

It’s true that many people also are wary of excessive government involvement in the economy. But doubts about the wisdom of business-friendly market systems run deep these days—as deep as the disastrous oil leak in the Gulf of Mexico. Concerns about capitalism were stoked by evidence that the oil industry cut corners on disaster prevention, relying for instance on “failsafe” well devices with a failure rate of an astounding 45 percent.³⁵

New York Times columnist David Brooks took note of simmering anti-market sentiments in a mid-2010 essay. Brooks said that even as BP and the Obama administration sparred over the Gulf spill, they were both on the same side of a larger, global struggle over the best political-social-economic system:

On the one side are those who believe in democratic capitalism—ranging from the United States to Denmark to Japan. People in this camp generally believe that businesses are there to create wealth and raise living standards while governments are there to regulate when necessary and enforce a level playing field…. On the other side are those that reject democratic capitalism, believing it leads to chaos, bubbles, exploitations and crashes. Instead, they embrace state capitalism. People in this camp run Russia, China, Saudi Arabia, Iran, Venezuela and many other countries. ³⁶

Although there are worthy elements in some of those societies, by and large they tend to be repressive. Western observers tend to believe that cronyism eventually will undermine state capitalism. But Brooks notes that “state capitalism may be the only viable system in low-trust societies, in places where decentralized power devolves into gangsterism.”

Company worthiness, therefore, plays a key role in this global rivalry over economic philosophies. Bad company behavior erodes trust and public willingness to embrace a version of democratic market capitalism. Good company actions, on the other hand, encourage people to reject an authoritarian approach to the economy—an approach that threatens the very existence of companies as we know them.

The success of the Worthiness Era has special significance for the United States. The rise of good companies is a key to preserving the country’s major role in the world economy, the U.S. standard of living, and the American Dream itself.

As we have outlined earlier in the book, the high-paying, knowledge-based, creative jobs that have evolved in the developed world all but require companies to be good employers. For the next iPad to be designed here, the next anti-cancer drug to be discovered here, the next cleanenergy breakthrough to be developed here, U.S. companies will have to be among the best at caring for, coordinating, and encouraging workers.

Otherwise those tasks will flow to other developed nations or to emerging economies like India and China. U.S. wages and incomes will continue to stagnate for the bulk of workers. And the baseline bargain at the heart of the American experiment—that working hard will pay off in the form of a comfortable life and a hopeful future for your children—will disintegrate.

Of course, it is misleading to talk of “U.S. companies” given the global nature of so many firms and their lack of national loyalties. And the fate of the U.S. economy also is in the hands of political leaders, education officials, and workers themselves.

Still, the relative worthiness of U.S.-based companies and the U.S. operations of foreign companies will go a long way toward determining whether America prospers in the years ahead.

GOVERNMENT POLICY AND THE WORTHINESS ERA

As we’ve noted, market forces—consumer, employee, and investor choices—are the primary reasons the Worthiness Era is at hand. But with so much at stake, we see a role for governments to help give birth to this new economic chapter.

One way governments can help usher in the Worthiness Era is by enforcing regulations more effectively. Skimpy enforcement in areas such as environmental protection, wage and hour laws, and consumer product safety amounts to rewarding scofflaws. Good companies that scrupulously play by the rules typically have higher costs than companies that cut corners on pollution safeguards, overtime pay, and the like. Only when government officials hold rule breakers accountable in a tough, fair fashion will worthier firms stand out as they should.

Earlier in the book, we detailed a pendulum swing back to more regulation on the part of governments. That momentum can’t come too soon in some areas. BP’s Gulf of Mexico oil spill, for example, revealed a foxguarding-the-henhouse mindset at the U.S. agency charged with regulating the offshore oil drilling industry—the Minerals Management Service. That agency, renamed the Bureau of Ocean Energy Management, Regulation, and Enforcement in the wake of the BP disaster, apparently failed to enforce a rule that required oil companies to submit proof that a key piece of their disaster-prevention equipment would work.³⁷ The piece in question, the blind shear ram on the blowout preventer, failed in the BP spill.

The National Commission assigned to study the Gulf spill agreed that oversight of offshore drilling must be upgraded: “Fundamental reform will be needed in both the structure of those in charge of regulatory oversight and their internal decision-making process to ensure their political autonomy, technical expertise, and their full consideration of environmental protection concerns.”³⁸

Disclosure is the second major way government can help bring about the Worthiness Era. The evolution of the Internet and government Web sites has made it possible for regular citizens to gather a large amount of information about companies, especially public companies. But it still remains difficult for people to piece together a complete portrait of a company’s relative worthiness. Consider the challenge of assessing a firm’s adherence to laws and regulations. Dozens of U.S. federal agencies exist that may have dinged a company for violating particular rules, to say nothing of the hundreds of state and local government groups that monitor business behavior.

Our own quest to create a measure approximating how well the Fortune 100 played by the rules proved to be very time consuming because no central clearinghouse for the information exists in the United States. We ended up limiting our research to fines and penalties levied by federal agencies. And, as mentioned earlier, we were surprised by how often some companies run afoul of the authorities. For some firms, it seems, breaking the rules—even when it involves paying a fine or settlement—is simply a cost of doing business.

We intend to update our research annually on major federal penalties for the Fortune 100. But that will remain a very constricted data set, given the millions of companies operating in the United States. To help the public distinguish between law-abiding firms and those with less respect for the rules, governments ought to establish a central database of information about company infractions. In the United States, a logical place for it would be in the Federal Trade Commission, with its mission of “Protecting America’s Consumers.”

Better disclosure shouldn’t just be about revealing companies’ rap sheets. We believe there is a key piece of doing-good data at companies that governments ought to expose: the amount of money spent developing employees. Companies tend to be reluctant to share this information publicly, but this data is important for a number of reasons. For one thing, these investments tend to be a win for companies and investors. As mentioned earlier, research by Laurie and Dan has shown that heavy investment in employee development corresponds with a stock outperforming peers in the market. In this regard, there’s a strong case to be made that the U.S. Securities and Exchange Commission and other stock-regulating agencies should require this key piece of information to be disclosed to investors on an annual basis.

What’s more, money spent on improving employee knowledge and skills signals a company cares about the career development and employment security of employees. It also shows the firm making contributions to improve a community’s capacities.

Some may argue that spending on employee development is an imperfect measure. After all, some training programs and approaches may be more effective than others.³⁹ But we believe that using the measure of spending on training and development per employee is a good start—it has repeatedly proved to be a predictor of subsequent stock prices.

Still others will take issue with adding yet another regulatory burden on companies. Yes, regulation can overreach and bury businesses in red tape. But if anything, governments in the United States and other parts of the world have erred in the other extreme. They have tolerated companies behaving badly on a regular basis.

Since the 1990s, a number of activists have called for a radical response to egregious business behavior: revoking corporate charters. This so-called death penalty for corporations involves state officials declaring that companies have violated the legal instrument that allows them to operate. Charters have been revoked for smaller firms in the last two decades for reasons such as failure to pay taxes.⁴⁰ And in the late 1990s, a group of organizations and individuals petitioned California’s attorney general to revoke the charter of oil company Unocal.⁴¹

The effort did not succeed. And the strategy of revoking charters for major firms has its challenges. Among these is a business-friendly climate in Delaware, where a large number of big companies are incorporated. Still, the notion of revoking charters is back in public discussion. That’s thanks partly to the success of the movie The Corporation, a documentary that highlighted the Unocal case and was sharply critical of companies.⁴²

The main policy implications we’ve outlined above involve a relatively light government touch: enforcing laws on the books and shining more light on good and bad behavior. But we’re not averse to government officials deciding to take a stronger stand for worthiness by revoking corporate charters. We believe consumers, investors, and employees in the years ahead will help good companies flourish, all but driving bad companies out of business. But if firms refuse to play by the rules, they don’t deserve to stay in the game.

CHAPTER TEN SUMMARY

How the Worthiness Era plays out in the future will be determined in no small part by the continued push for business agility as well as developments in emerging Asian economies. The stakes are high that worthiness wins; while market forces are the main engines pushing companies in the direction of goodness, governments also have a role to play in ensuring that worthiness rules the day.

Worthiness Meets the Agile Organization and Emergent Asia

• The need for agility—in large part driven by increased global competition—has caused U.S.-based firms to focus on core competencies, limit fixed costs, rely on outsourcing, and use layoffs liberally.

• It is becoming clear, however, that true agility isn’t defined simply by cutbacks—by seeking to be as unencumbered as possible. At some point, a preoccupation with paring back becomes organizational anorexia. Overly skinny firms are both weak and slow.

• The ability to move fast involves both weight and strength. Strength has to do with beefing up rather than breaking down connections with workers, suppliers, and customers. It requires reciprocity and trust.

• In emergent Asia, product safety and environmental protections are still weak, and workers continue to suffer from harsh conditions, including at third-party suppliers to Western brands.

• In this sense, Asia’s rise could be said to have been a net contributor to bad company behavior.

• But the Asian equation is starting to change:

1. Activists are holding companies’ feet to the fire.

2. Lower-skilled Chinese workers are less willing to accept unworthy wages or working conditions, and a new, more enlightened generation of managers and executives is coming of age in China and India.

3. Asian governments are beginning to take important steps in the right direction.

4. Asian consumers are also pushing companies toward greater worthiness.

The Stakes Are High That Worthiness Wins

• Better company stewardship of the environment is critical to avoiding climatic catastrophe.

• Company worthiness is vital to the well-being of billions of workers. Beyond health and safety initiatives that help workers survive their jobs, companies can help employees thrive in their lives.

• Worthiness also matters to consumers, and without more of it, companies may find the global populace increasingly opposed to capitalism itself.

• The relative worthiness of U.S.-based companies and the U.S. operations of foreign companies will go a long way toward determining whether America prospers in the years ahead.

Government Policy and the Worthiness Era

• Market forces—consumer, employee, and investor choices—are the primary reasons the Worthiness Era is at hand.

• With so much at stake, there is a role for governments to help give birth to this new economic chapter. The main policy implications involve a relatively light government touch:

1. Enforcing regulations more effectively is required; only when government officials hold rule breakers accountable in a tough, fair fashion will worthier firms stand out as they should.

2. Additional corporate disclosures mandated by the government will help the public distinguish between good and bad behavior. For example, governments ought to establish central databases about

a. company infractions to help the public identify law-abiding firms and those with less respect for the rules

b. the amount firms invest in learning for employees, information that is crucial to stockholders, employees, and communities

If companies refuse to play by the rules, they don’t deserve to stay in the game. Government officials should take a strong stand for worthiness in cases of consistent and egregious failure to abide by the law, by revoking corporate charters.