Lynn Stout, Distinguished Professor of Corporate and Business Law at Cornell Law School, was among the world’s leading lights in politics, academia, diplomacy, economics and journalism at the Clinton Global Initiative, held this week to discuss solutions to the growing global economic crisis. Professor Stout participated in a panel called Working Capital: Creating Value for Business and Society, which followed a speech by President Obama.
Richard Stengel, managing editor of TIME magazine, moderated the panel. Other panelists were Arif Naqvi, Founder and Group Chief Executive of Abraaj Holdings and Jochen Zeitz, CEO of Sport & Lifestyle Division and Chairman, PUMA.
Professor Stout’s panel discussed how multi-nationals can have a positive impact on the global economy. “We should not lose sight of the fact that big businesses are a vital part of the larger solution,” said Professor Stout. At the same time, she pointed out, there are obstacles, including the practice of running companies with the sole purpose of maximizing stock price. This is a relatively new idea, Professor Stout said, and one that is not working for employees and in fact “not working well” for anyone. Professor Stout said that there is no evidence that these companies perform any better than those companies that do not engage in this practice.
Professor Stout pointed out that the obsession with stock price has hurt the economy. She said that while in 1960 the average investor held onto a stock for an average of eight years, today’s investor is much more impatient, on average holding a stock for four months. Professor Stout proposed a stock transfer tax that would encourage investors to hold onto stocks longer and therefore contribute to a sounder economy overall.
The panel focused on sustainability as the means to bolstering the economy. Mr. Naqvi told the audience that long-term sustainability and long-term profitability need not be mutually exclusive. Mr. Zeitz called for greater transparency for businesses, exposing those businesses that are not committed to sustainability. Professor Stout proposed that sustainability-related incentives should be built into the compensation packages of CEOs to encourage corporate sustainability.
Professor Stout said of the conference, “CGI reflects the energy and the imagination of its founder, President Bill Clinton. It presses a relentlessly optimistic view, reminding us we can go a long way toward solving the world’s problems if we are willing to abandon the easy comfort of cynicism and roll up our sleeves to apply our creativity and strength to make things better.”