Date: 2025-04-06 Page is: DBtxt003.php txt00004264
Peter Burgess Connections ... Dialog Jonathan Cloud, Victoria Zelin
What to do about economic dysfunction
Burgess COMMENTARY
Peter Burgess
Peter Burgess
Begin forwarded message:
From: 'Institute for Sustainable Enterprise'
“The Shareholder Value Myth”
an ISE/CHRMS Breakfast Seminar
Friday, December 21, 2012
7:30 - 9:30 a.m.
SPEAKERS:
Lynn Stout, Ph.D.
Professor of Law, Cornell University
Frank Werner, Ph.D.
Associate Professor of Finance, Fordham University
Hartman Lounge in “Hennessy Hall” (The Mansion)
*You have been invited by seminar sponsor ISE/CHRMS at the College at Florham campus
of Fairleigh Dickinson University.
Presentation Highlights:
Institute for Sustainable Enterprise
My best regards,
Jonathan Cloud
Our mission is to create, launch, and grow sustainable social enterprises—enterprises that are mission-driven, effectively implemented, and economically successful.
Dear Jonathan and Victoria
A quick thank you for yesterday ... I am sorry that I somewhat over-stayed my welcome. Time flies when you are having fun.
With regard to the purpose of the corporation and the responsibility of the management ... I found this paper by Lynn Stout on 'The Problem of Corporate Purpose'
I think this is the thesis of her book ... but I am not sure. I wish I had heard what she had to say in person when she came to the ISE.CHRMS Breakfast Seminar last December.
As in many things related to law, the British Law is probably easier to understand than the American version ... and the Companies' Act 1947 and its updated kin more recently is pretty clear that the shareholders interests are primary. The former head of Barclay's made this abundantly clear in a televised interview about a year ago.
My own experience in US corporate management was relatively simple. The job was to use the company's resources to strengthen the company to maximize profit. I believed in the importance of business ethics ... right and wrong ... etc., but these concepts had no place in the formally articulated purpose of the company and its legal environment. That was a long time ago ... but I am not at all sure that the legal situation has changed very much, in fact, Lynn Stout seems to suggest that the stock price is even more important in the last 20 years than it was a long time ago.
Nevertheless, I think Lynn Stout makes a very good case for complementary metrics so that the performance of the company can be better understood by the stockholders, Board of Directors and decision making C-level executives. I am aware of many initiatives that are trying to provide these complementary metrics, but so far none of them seem to be hitting the mark. Whether I can structure TrueValueMetrics so that it can be accepted both by the corporate accounting community and the many constituencies in the outside community and society is the challenge. I know it can be done ... whether I can do it, is another question.
With regard to the many questions that got raised yesterday ... I spent a happy evening and a good part of the night trying to digest our conversation.
I particularly like the idea that community is the center of everything. For me this raises the question of how does one go about measuring the progress and performance of a community. I consider progress to be the improvement in the quality of life of the community ... the sum of ALL the groups in the community. But what are the bounds of the community ... and what role is community government, and community banks, and businesses in the community ... and schools ... and hospitals ... and utilities ... and ... and ...! In the corporate accounting function ... the metrics are independent of all of the operating units. The same needs to apply for community metrics ... but how to do this? It is interesting to think of how the framework of National Accounts can scale down and be relevant at the community level ... and in some ways this is one of the things that TrueValueMetrics does.
Organization and metrics. In the corporate world ... GE for example ... everyone knows who they report to and the metrics being used. The corporate structure facilitates expanding to scale. In the not-for-profit world it is way more difficult to scale, and many efforts to scale have resulted in the undoing of good works. What sort of organizational rethink could help to sort this out? Are there specific constraints that keep the typical not-for-profit smaller than optimum. I would identify lack of appropriate metrics and difficulty with financing as two issues ... not to mention an unhealthy level of competition. There may be a huge need, but there are small resources available to get the need satisfied. The motivation of not-for-profit leadership is an asset that should be used most productively, and as I see it, this gets accomplished not by merging independent entities, but by enabling these independent entities to grow. Part of this is to have things that are needed easily outsourced.
The financial community prides itself on innovation ... with some justification. In the main the innovation has benefited the financial community, but this need not be the only beneficiary. I watched the microfinance sector become an 'asset class' in the financial world when the Microfinance Investment Vehicle (MIV) was created. In my view it became a disaster for the microfinance world when money profit return took over, but it shows what can be done in terms of financing flows when the capital markets get mobilized. I am very interested in seeing Impact Investing emerge as an asset class, but it absolutely must have appropriate metrics in order to be sustainable. PACE, the Collective Investment Fund (CIF) initiative, SOCAP and the work of Durreen Shahnaz in Singapore developing a Social Impact Investment Exchange are all parts of this. There is a lot going on in this space. It is very important.
Where does complementary currency fit into all of this? There is evidence that a complementary currency helps to stabilize a local economy ... but these alternative currencies can have the opposite outcome. I have concluded that the idea is good, but that small may be better than big. There are already too many entities that are too big and out of scale relative to their customers and working staff. A complementary currency has the potential to create credit where it is most needed ... built on top of the value that is especially important for the community, and of no interest to money center institutions.
Where does the community bank fit in? Many small banks are no longer community banks but merely remote branches (albeit nominally independent) of the money center banks. Maybe a community bank should be the local 'Federal Reserve' of the community's alternative currency. This is to some extent what has happened, I believe in some of the longer lasting complementary currencies.
Where do local professional firms fit it? Accounting firms should become part of the infrastructure for the community level application of community level value metrics. Engineering firms should be engaged with the issues of technical sustainability ... design, oversight, etc. Real estate firms have local knowledge that should be invaluable.
Where do community governance institutions fit in? PACE is an example. Also Municipal Bonds. Whether or not the Municipality should be the main source of financing for the community or some financing entity that is community based but 'private' is a discussion to be had. There probably should be both.
Where does 21st Century technology fit in? Most of the data should be available 'in the cloud'. There are all sorts of issues to be addressed. The technological capability exists to do amazing things. The quantity of raw data is increasing exponentially, but quality is a huge issue. In my view there is a need to redirect the effort to things that would be more useful ... and the definition of more useful still has to be distributed. I like the potential of initiatives like Ushahidi not only applied to emergency situations but to normal community situations.
There are many elements in the real world ... pulling them all together into a coherent package is a challenge ... but it must be done. Yesterday was very helpful. Your history and experience is different from my own, but there are a huge number of areas where there is overlap, and many areas where experience and capability are complementary.
My hope is that something very positive and powerful might emerge from this ... and again my apologies for not being very time conscious yesterday.
Peter
Yes, I think this is her central argument, that maximizing shareholder returns is a matter of tradition and conventional belief in the US, but not of law per se. I don't know about the British law, but in Gangs of America, Ted Nair points out that corporations were originally chartered for limited periods, and for what were considered public as much as private purposes.
Further to our conversation I also had some ideas, and in particular one that I think might begin to address your desire to see an economy based more on 'true value' than on monetary profit regardless of consequences, and it's this:
It's sometimes argued that this could or should be done by changing the tax system. From an ecological standpoint, the central problem with our current tax system is that it rewards undesirable behavior (pollution, fossil fuel consumption, etc.), and penalizes desired behavior, such as working or being successful in business. By reversing this, we could create a series of economic incentives for sustainable behavior, and a series of disincentives for ecologically-harmful behavior.
Another way of accomplishing the same result, however, is developing a complementary currency and economic system that rewards sustainable activities, and essentially pays for offsets for unsustainable ones.
Part of the challenge with developing a 'true value' system is that (a) value is relative, not absolute, and (b) it changes over time. So you can't develop an 'encyclopedia' of true values. Food is worth something to me if I'm hungry, but not if I'm full. Jewelry is worth something to me if I am looking for adornment, nothing at all if I've taken vows of poverty. So the 'worth' of something has to be worked out in practice in the context of an exchange. This is, after all, what money is for. The challenge is to have the measure of worth reflect the total or systemic costs and benefits associated with the transaction. Of course, it may be impossible to know the total costs and benefits of any given transaction, but we can approximate these over time. If our measure of worth is required to include what we now call 'externalities,' and we treat the needs of the future the same as those of the present, we'll be much closer to 'true value,' at least from an ecological standpoint.
Again, as I said, value is relative. So the value of something to the ecosystem may be different from the value to any given individual, depending on their point of view. But the purpose of laws and regulations and systems is to establish the basis for determining the worth of something in the marketplace. As our long discussion of shareholder maximization actually demonstrates, it's what our objectives are that determine the 'value' we assign to something. If our objective is to maximize the benefit to society, or to the natural world, or to the earth as a whole, we'll look at particular transactions differently.
This could be accomplished by changing our taxation system, or changing our dominant economic system; but in my view these are difficult and long-term endeavors. But creating a complementary currency, or one that you might call a 'compensatory currency,' might not be so difficult. Imagine an ecological reserve (as opposed to the Federal Reserve), which issued currency based on sustainable-development principles. If you reduce so much carbon or other pollution, you're issued credits, with which you can purchase the goods and services you need. The more these goods and services damage the environment, the more they cost; the more they help the environment the less they cost you, but the more reward they attract from the ecological reserve. Instead of charging interest on credits, we might charge a demurrage fee, as Bernard Lietaer and others have suggested, thereby encouraging people to spend the credits rather than hoard them; but there will also be a way to accumulate wealth, by building up sustainable assets (self-sustaining forests, or equipment to remove CO2 from the environment).
Yes, there would be difficulties in determining on a case by case basis the 'sustainable value' of a given item or transaction, but this is no different than the challenge of determining what something's worth in the market today, which is created by rules that reward selfishness and greed; it's a negotiated price, where the negotiation is based on the advantage to the parties individually. But if the rules governing the market were different, the negotiated price would reflect those rules.
I'm not suggesting this is easy or straightforward, but it seems at least feasible. You could think of it as similar to the pricing of carbon offsets, or an extension of the idea of cap and trade. What's needed is a set of rules that establish a market for whole-system benefit, and impose costs on things that reduce the wealth of the system as a whole. In practice these will be rough and ready to start with (just at the EU got the initial pricing cap and trade pricing wrong), but over time it can be improved.
I think this is one answer to the question you are seeking to address with the TVM system. There may well be others, but I'd be interested in your reactions to this, which I think will be one of the outcomes of my 'Remaking Money' paper. Let me know what you think. Thanks
My best regards,
Jonathan Cloud
Victoria Zelin
Peter,
You met Bill Russell at a recent ISE event.
Bill is an expert in sustainability metrics, former PwC, and a great person.
I mentioned to Bill your TrueValueMetrics work (and Peter is a fine chap, Bill!).
I'm sure it will be mutually valuable to talk.
Best,
Victoria
Glad it was useful!
BTW, in the Unified Field Corporation vision, the software on which the new bank model will be built will also accommodate local complementary currencies (and they will be able to be traded from community to community).
Victoria
Getting software partners
Victoria Zelin
---------- Forwarded message ----------
Whether you're still looking for a co-founder or already found one, check out our Startup Resource Center where you'll find the best products to launch your startup. We've negotiated some great deals just for you.
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Learn more about the Startup Resource Center on our blog.
Your biggest fans,
The CoFoundersLab team
Fwd: Dec. 21 Brk Sem: “The Shareholder Value Myth”
Jonathan Cloud
3 messagesSubject: Dec. 21 Brk Sem: “The Shareholder Value Myth”
Date: December 17, 2012 12:16:50 PM EST
To: 'Friends of ISE/CHRMS'
Reply-To: pniewski@fdu.edu
Fairleigh Dickinson University
285 Madison Avenue
Madison, NJ 07940
To see flyer for more information, click: http://view.fdu.edu/files/dec12brkflyer.pdf
Fairleigh Dickinson University
285 Madison Avenue, M-MS1-05
Madison, NJ 07940
973-443-8577
www.fdu.edu/ise
Chairman, Sustainable Business Accelerator
A NJ Nonprofit Corporation
8 Revere Drive, Basking Ridge NJ 07920
Phone: Office 908-396-6179 ~ Cell 908-581-8418 ~ Fax 908-842-0422
http://sbanj.org
Peter Burgess
Mon, Mar 11, 2013 at 1:04 PM
To: Jonathan Cloud
http://www.brookings.edu/~/media/research/files/papers/
2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf
/////////////////////////////////////////////
____________
Peter Burgess
TrueValueMetrics ... Meaningful Metrics for a Smart Society
twitter: @truevaluemetric @peterbnyc
www.truevaluemetrics.org
blog: http://truevaluemetrics.blogspot.com
blog: http://communityanalyticsca.blogspot.com
mobile: 212 744 6469
email: peterbnyc@gmail.com
skype: peterburgessnyc
Books: Search Peter Burgess at www.lulu.com
Jonathan Cloud
Imagine a currency that is based on the notion of sustainability. That which advances sustainability is rewarded. That which retards it is penalized. Even if this were not the dominant currency, it could have a beneficial effect in offsetting some of the worst effects of the 'predatory corporatism' that is our current version of the free enterprise system.
This is the basis for developing Sustainable Value Units (SVUs). SVUs will be issued by a central clearinghouse to businesses and individuals providing sustainable solutions, credits that can be used to purchase goods and services within a growing network.
Center for Regenerative Community Solutions, a NJ Nonprofit Corporation
8 Revere Drive, Basking Ridge, NJ 07920
Office 908-396-6179 ~ Cell 908-581-8418 ~ Fax 908-842-0422
jcloud@crcsolutions.org ~ Skype: jonathancloud ~ www.crcsolutions.org
Peter Burgess
Tue, Mar 12, 2013 at 12:56 PM
To: Peter Burgess
Victoria Zelin
Principal, Regenerative Community Ventures, Inc.
and Regional Coordinator, Unified Field Corporation
908 306 0272 office
908 507 3150 cell
vzelin@rcventures.net skype victoriazelin
www.unifiedfieldcorporation.com
Re: peter burgess
Victoria Zelin
Mon, Mar 11, 2013 at 10:37 PM
To: Peter Burgess
Peter Burgess
Sun, Mar 10, 2013 at 9:04 PM
To: Peter Burgess
From: 'CoFoundersLab Team'
Date: Mar 9, 2013 4:49 PM
Subject: New Startup Resource Center launched
To: 'Victoria Zelin'
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