This article originally appeared on LinkedIn.
In this, the second installment of the newsletter, I thought I would share a few interesting ideas in the news.
On July 24, the New York Times published a piece by Harvard economics professor N. Gregory Mankiw, provocatively titled “CEOs Are Qualified to Make Profits, Not Lead Society.” I completely agree with one point Mankiw makes—that executives need to focus their decisions on just one group of stakeholders. But while he defaults to the old-school view that shareholders deserve primacy, I believe today’s most successful companies put customers at the center. The evidence: In industry after industry, companies with the highest customer Net Promoter Scores rack up better growth and shareholder returns.
Mankiw’s piece is in part an argument against the movement toward broader corporate purpose embraced by the Business Roundtable last year. He makes a compelling case that leaders cannot serve multiple masters. How true!
But Mankiw and I part ways when he argues that executives are the wrong people to manage the complex issues facing society. Yes, the challenges are daunting, but that's all the more reason that leaders of all types of organizations—corporations, nonprofits, schools, hospitals—must pitch in and help. No matter how competent our elected leaders, can we really expect them to solve everything we face right now?
Some of the very best communities I have encountered were built by corporate leaders who believe that the primary purpose of their company is to enrich customer lives. Creating communities of accountability around this mission provides not only a better world for customers, but also meaningful careers for employees and superior returns for investors. And I suspect most businesses are more responsive to feedback than the typical elected official. (Long before many governments had their act together, large companies including Apple, Costco and others required that both employees and customers wear masks to protect the community from Covid-19.)
“Everyone seems to hate America’s giant tech companies these days—except the hundreds of millions of people who use their products.” That’s how the Wall Street Journal editorial board opened its critique of the recent interrogation of big tech CEOs on Capitol Hill. Unfortunately, the article didn’t dig into the value of customer voice.
Last December, I contributed a piece to LinkedIn’s Big Ideas 2020 project. My idea was that regulators should tap into the increasingly rich vein of customer data when weighing whether companies are so big they require breaking up. The happier their customers, the weaker the argument for antitrust action, I think.
Do you agree?