Speed. Change. Time. LO10258

Rol Fessenden (76234.3636@CompuServe.COM)
30 Sep 96 00:52:57 EDT

Replying to LO10248 --

Jeff asks, "I've heard some CEO's say that their only constituency is the
company's shareholders. While I realize that this may be an extreme
perspective, it brings up an important point: If the shareholders'
connection to the company is only in terms of money, don't the
shareholders act as pressure on the company to place profit above every
other consideration? I guess this leads to the question of what
constitutes a "good" company and from whose perspective such a judgment
can be made."

Excellent question. I can't comment on what another person said, but the
systemic view is that the company cannot -- will not -- survive unless it
reaches some level of accomodation with all of the following
'stakeholders' -- customers, suppliers, communities, employees, and
shareholders. The reality is that a company ignores any of these
stakeholders at their peril. Granted, some stakeholders are more
demanding than others.

My guess is that a smart CEO understands what I have said, and so if they
are focused on profit, they are focused also on maintaining a certain
level of accomodation with all the stakeholders simply because that is the
best route to sustained profit. Ignoring one stakeholder community may
help short-term profits, but will definitely hinder long-term profits.

The current situation between Chrysler and their suppliers and GM and
their suppliers is a good example. GM has been for several years
hammering their suppliers to take costs out of product, and they have been
very cut-throat about it. Chrysler has taken the perspective that they
also want to take money out of their product, but they are willing to
share the gains with their suppliers. They pay suppliers to offer
cost-cutting ideas. They increase their loyalty to the best cost-cutters.
Suppliers have, as a consequence, taken a lot of costs out of the product,
and Chrysler is now the lowest-cost, highest profit producer in the US.
Well ahead of GM.

There have been a number of articles in the Wall Street Journal and
Harvard Business Review recently about Chrysler. It makes excellent


Rol Fessenden INTERNET:76234.3636@compuserve.com

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