Investors Michael O’Leary and Warren Valdmanis have written a prescription to cure what ails our capitalist society in a new book that is easier to swallow than most bitter-pill business tomes. It does, however, come with a side effect: You may never look at this newspaper the same way again.
“Accountable: The Rise of Citizen Capitalism” (Harper Business press) uses the Half Moon Bay Review as a case study illuminating an antidote to the current state of much of the news business — a market dominated by private equity owners with no concern for the communities they ostensibly serve who are bleeding once-proud newspapers from Miami to San Jose.
On the very last page of this readable plea for a more rational form of capitalism, the authors quote another important Coastside figure: “Make no little plans,” said Daniel Burnham, the architect behind El Granada and so much more. “They have no magic to stir men’s blood and probably themselves will not be realized.”
Maximizing short-term profits may make the few rich, but it rarely stirs the blood of men, the authors argue.
O’Leary studied philosophy at Harvard and business at Stanford and helped found the impact investing strategy at Bain Capital. Valdmanis got his MBA from Harvard and has led investments across the globe. The authors, pictured on the book jacket in standard blue blazers, are not closet socialists bent on subverting capitalism. Instead, they suggest corporations — and the rest of us — would be better off pursuing long-term sustainability rather than quarterly profits.
The heart of the problem is “fiduciary absolutism” — a cultish mantra that maintains corporations exist solely to maximize shareholder value. The concept and the institutional investor arose together.
Take the news business. While individual shareholders are invited to vote on initiatives before the board of Gannett, the nation’s largest newspaper company, they rarely do. (The authors nod toward 78-year-old John Lauve, a retired automotive engineer who owns only two shares of Gannett stock but routinely shows up at corporate board meetings to plea for better news coverage.) Instead, institutional investors like Alden Global Capital control many newspaper board elections to the detriment of the
137 million Americans who invest in the stock market and would rather see slow, steady, sustainable growth around a purpose rather than quick profits.
The authors highlight Wick Communications’ 2017 sale of the Review to local Coastside investors. They note that the newspaper — now chartered under a new company, Coastside News Group Inc. — formed as a California benefit corporation. That means the business must serve a community purpose first, before making money for investors.
“It’s meant to be profitable, yes, but only in pursuit of its deeper mission as a newspaper. In this it is a far cry from the large, highly distributed corporations that are international in scope and impersonal in ownership,” the authors maintain.
The book proposes creating corporations that live up to common values, those held by typical individual investors. It suggests rechartering corporations around purpose, holding them accountable and assuring the purpose is profitable.
While some may say that is impossible, there is evidence that companies that get the formula right are also the best investments in 2020. The New York Times reported last month that 64 percent of funds that focus on E.S.G. — environmental, social and governance impact investment — beat their benchmarks this year. That is considerably better than performance of traditional funds through August 2020. Investors told the New York Times there was an emerging consensus that prior strategies have not been good for society or ultimately the bottom line.
It’s easy to imagine the authors of “Accountable” nodding along as they read the news.
While researching his book, O’Leary interviewed the writer of this piece and Coastside News Group Inc. CEO Rich Klein. Neither received compensation for their participation in the book nor for this story.