[Annotated] Business can and will adapt to the age of populism

How executives balance^[각주:1] shareholder expectations and social pressures^[각주:2] 

As they slid down^[각주:3] the streets of Davos this week, many executives will have felt a question gnawing in their guts^[각주:4]. Who matters most: shareholders or the people? Around the world a revolt^[각주:5] seems under way^[각주:6]. A growing cohort^[각주:7] - perhaps a majority - of citizens want corporations to be cuddlier^[각주:8], invest more at home, pay higher taxes and wages and employ more people, and are voting for politicians who say they will make all that happen. Yet according to law and convention in most rich countries, firms are run in^[각주:9] the interest of shareholders, who usually want companies to use every legal means^[각주:10] to maximize their profits.

Naive executives fear^[각주:11] that they cannot reconcile^[각주:12] these two impulses. Should they fire staff, trim costs^[각주:13] and expand abroad - and face the wrath of Donald Trump's Twitter feed, the disgust of their children and the risk that they'll be the first against the wall when the revolution comes? Or do they bend to^[각주:14] popular opinion and allow profits to fall, inviting the danger that, in the run up to^[각주:15] their 2018 annual general meeting^[각주:16], a fund manager from, say, Fidelity^[각주:17] or Capital will topple^[각주:18] them for underperformance^[각주:19]?

Wiser executives know that shareholder value^[각주:20] comes in shades of grey^[각주:21]. It has been a century since the idea was baked into^[각주:22] American law. In 1919 a court ruled that "a business corporation is organized and carried on primarily for the profit of the stockholders^[각주:23]." In the 1990s this view spread to Europe, Asia and Latin America because of reforms to governance laws and the rising clout^[각주:24] of institutional investors^[각주:25]. But the doctrine^[각주:26] is not monolithic^[각주:27]. Schumpeter reckons there are six distinct corporate tribes^[각주:28], each with its own interpretation of what shareholder value means. Firms have some flexibility to choose which one they belong to.

Start at the far right of^[각주:29] the spectrum^[각주:30], with the corporate fundamentalists^[각주:31]. Boosting their profits and share price - immediately - is their goal. Firms built on these objectives rarely do well for long. Valeant, a Canadian pharmaceutical concern^[각주:32], is an example. In 2011-15 it raised prices, slashed investment^[각주:33], paid little tax and fired staff. By 2016 it faced scandals and its shares fell by 85%. Occasionally firms become so weak that they use fundamentalist tactics^[각주:34], temporarily, to try to restore confidence^[각주:35]. IBM is shoring up^[각주:36] its stock price^[각주:37] with savage cost cuts^[각주:38] and share buy-backs^[각주:39].

Shift a little to the left and there are the corporate toilers^[각주:40]. Most Western firms place themselves in this group. They believe in the primacy of^[각주:41] shareholder value but are prepared to be more patient. At their best these firms are consistently successful - think of Shell or Intel investing on^[각주:42] a ten-year time horizon^[각주:43]. 

Corporate kings are in a luxurious position. They are so successful at creating shareholder value that they have a licence to ignore it periodically^[각주:44]. In July Jamie Dimon, the boss of JPMorgan Chase, now the world's most valuable bank, gave its lowest-paid^[각주:45] staff a pay rise, "because it enables more people to begin to share in the rewards of economic growth". Paul Polman describes Unilever, the consumer-goods firm he runs, as a non-governmental^[각주:46] organization committed to^[각주:47] cutting poverty^[각주:48]. He can do so only because Unilever makes a stonking^[각주:49] return on equity (ROE) of 34%.

Outside Western boardrooms^[각주:50], the most common sect^[각주:51] is the fifth, corporate socialists. These firms are controlled by the state, families or dominant managers. They think that shareholder value is not as important as social objectives^[각주:52] such as employment, high pay or cheap products. But they recognize that institutional investors have some legal powers^[각주:53]. So profits are set^[각주:54] according to an informal quota system^[각주:55] - outside shareholders should get the minimum required to avoid a revolt^[각주:56], but no more. China's state firms together book^[각주:57] an ROE of 6-8%. Goldman Sachs is a corporate champagne socialist^[각주:58]. It pays its shareholders the least it can get away with^[각주:59] and allocates^[각주:60] what is left as bonuses for its staff.

On the far left are the corporate apostates^[각주:61]. They are organized in a corporate form^[각주:62] but don't care about shareholders at all. Usually this is a result of political dysfunction^[각주:63]. PDVSA, Venezuela's state oil firm, pays for much of the country's welfare state and cronyism^[각주:64]. Fannie Mae and Freddie Mac, two state-owned^[각주:65] American mortgage firms, are run to make cheap loans, not profits.

Sects change

Between 1990 and 2007 companies around the world drifted right towards^[각주:66] shareholders. Now in response to populism they may drift back^[각주:67]. But don't expect a governance crisis. The system is adaptable^[각주:68]. Carmakers are shifting factories to America; drugs and defence firms may slash prices. All have become oracles^[각주:69]. They anticipate that the Trump administration will change rules on tariffs and government procurement^[각주:70] that govern their businesses. Shareholders can object^[각주:71] only so much. Firms become corporate socialists^[각주:72] if they have controlling owners who demand they prioritize social objectives^[각주:73]. There is no sign of this yet.

Many individual firms will still move the other way, towards shareholders. Google is becoming a corporate toiler, not a king, as its growth slows. After its emissions scandal^[각주:74], Volkswagen is dropping its extravagant^[각주:75] ways and firing staff. Under its new boss, Tata Group in India will now start to worry about profits as much as nation-building^[각주:76]. And in order to revive the economy^[각주:77], Japan's firms will need to drive their ROE above the present, sluggish^[각주:78] 8%. In the contest between^[각주:79] shareholders and the people, companies and bosses are caught in the middle^[각주:80]. But there are no final victories. Just constant, pragmatic accommodations^[각주:81]. 

1. balance ; 3. BE/KEEP EQUAL | [타동사][VN] ~ A with/and B (대조적인 두 가지 사이에서) 균형을 이루다 [본문으로]
2. social pressure ; (정치학) <용어>사회적 압력 [본문으로]
3. slide down ; 미끄러져 내려가다. [본문으로]
4. gnaw ; ~ (away) (at/on sth) 쏠다, 갉아먹다, 물어뜯다 ;; US.UK [nɔ:] [본문으로]
5. revolt ; [C , U] 반란, 봉기, 저항 [본문으로]
6. under way ; 이미 시작된[진행 중인] [본문으로]
7. cohort ; [명사] (전문 용어) (통계적으로 동일한 특색이나 행동 양식을 공유하는) 집단 [본문으로]
8. cuddly ; [형용사] (호감) (사람이 사랑스러워) 꼭 껴안고 싶은 [본문으로]
9. be run in ; 운영되어진다 ; be managed by [본문으로]
10. legal means ; 법적 수단 [본문으로]
11. fear ; 1. (…을) 두려워[무서워]하다 [본문으로]
12. reconcile ; 1. ~ sth (with sth) (두 가지 이상의 생각・요구 등을) 조화시키다 [본문으로]
13. trim costs ; 비용을 절감하다 [본문으로]
14. bend to ; …으로 구부러지다, …에 따르게 하다. [본문으로]
15. in the run up to ; 급조와중에, 찰나에, 하는 중에 [본문으로]
16. annual general meeting ; (영, 미) 연차 주주 총회( annual meeting) ((略 AGM)) [본문으로]
17. fidelity ; 1. ~ (to sth) (격식) 충실함 [본문으로]
18. topple ; 2. [타동사][VN] 실각시키다 [본문으로]
19. underperform ; [동사] (예상보다) 기량 발휘를 못하다[실적을 못 내다] [본문으로]
20. shareholder value ; 주주 가치 [본문으로]
21. come in shades of grey ; 문맥상 주주 가치의 중요성이나 영향력이 옅어 졌다는 의미로 보임 [본문으로]
22. be baked into ; 2. (열로) 굽다[굳히다]; 굳어지다 ;; be settled [본문으로]
23. stockholder ; (특히 美) 주주(株主) [본문으로]
24. clout ; 1. [U] 영향력 [본문으로]
25. institutional investors ; 대규모 자금운용을 하는 기관투자가 [본문으로]
26. doctrine ; 2. [C] Doctrine (美) (정부 정책상의) 원칙, 독트린 [본문으로]
27. monolithic ; 2. <조직·단결 등이> 단일체의, 한 덩어리로 뭉친 [본문으로]
28. tribe ; 2. (보통 못마땅함) (특히 특정 전문직에 종사하는) 집단[무리] [본문으로]
29. at the far right of ; 맨 오른쪽에 있는 [본문으로]
30. spectrum ; 3. [주로 단수로] (관련 특질・생각 등의) 범위[영역] [본문으로]
31. fundamentalist ; 2. 정통 회귀론자, 원리주의자. [본문으로]
32. pharmaceutical ; [명사 앞에만 씀] 약학의, 제약의 [본문으로]
33. slash ; 2. [흔히 수동태로,흔히 신문에서] 대폭 줄이다[낮추다] [본문으로]
34. tactics ; 2. [pl.] tactics 전술 [본문으로]
35. restore confidence ; 자신감을 되찾다 [본문으로]
36. shore up ; 강화하다 [본문으로]
37. stock price ; 주가 [본문으로]
38. savage ; 무자비한, 대량의 정도의 의미 [본문으로]
39. share buyback ; 주식 환매 [본문으로]
40. toiler ; 고생하는 사람; 임금 노동자 [본문으로]
41. primacy ; 우위 [본문으로]
42. invest on ; ~에 대한 투자 [본문으로]
43. time horizon ; (경제) 시계 [본문으로]
44. periodically ; [부사] 정기[주기]적으로 [본문으로]
45. low-paid ; [형용사] 임금이 적은, 저임금의 [본문으로]
46. non-governmental ; [형용사] 정부와 무관한, 민간의. (또는 nongovernment) [본문으로]
47. commit to ; …에 전념[헌신]하다. ;; [본문으로]
48. cut poverty ; 빈곤을 줄이다 [본문으로]
49. stonking ; [형용사] (주로 명사 앞에 씀) (英 비격식) 엄청나게 거대한[굉장한] [본문으로]
50. boardroom ; 중역 회의실, 이사회실 [본문으로]
51. sect ; (때로 못마땅함) 종파(宗派) [본문으로]
52. social objective ; 사회적 목표 [본문으로]
53. legal power ; (law) the right and power to interpret and apply the law [본문으로]
54. be set ; 정해지다 [본문으로]
55. quota system ; [the ~] (수입액·이민수 등의) 할당 제도, 쿼터제 [본문으로]
56. revolt ; [C , U] 반란, 봉기, 저항 [본문으로]
57. book이 동사로 쓰인듯 한데 together이 뒤에 위치하고 있는게 어색하지는 않은지 의문 [본문으로]
58. champagne socialist ; [명사] (英 못마땅함) 부유한[누릴 것 다 누리는] 사회주의자 [본문으로]
59. get away with ; ~을 훔쳐 달아나다 [본문으로]
60. allocate ; ~ sth (for sth) | ~ sth (to sb/sth) | ~ (sb/sth) sth (특정 목적을 위해 공식적으로) 할당하다 [본문으로]
61. apostate ; (격식) 변절자; 배교자 [본문으로]
62. corporate form ; 법인형태 [본문으로]
63. dysfunction ; [UC] [병리] 기능 장애; [사회] 역기능 [본문으로]
64. cronyism ; [명사] (못마땅함) 정실(情實) 인사 ;; the appointment through favoritism, the spoils system ;; 정에 끌려 사람을 뽑는다는 의미 [본문으로]
65. state-owned ; 국유의, 국영의 [본문으로]
66. drift toward ; ~로 이동하다 ; ~인 상태로 변해가다 [본문으로]
67. drift back to ; (상황 등에) 떠밀려 되돌아 오다. [본문으로]
68. adaptable ; (호감) (새로운 환경에) 적응할 수 있는 [본문으로]
69. oracle ; 3. [주로 단수로] 귀중한 조언[정보]을 주는 사람[책] [본문으로]
70. procurement ; [U] (격식) (특히 정부・기관의 물품) 조달[입수] [본문으로]
71. object ; 1. [자동사][V] ~ (to sb/sth) | ~ (to doing sth/to sb doing sth) 반대하다 [본문으로]
72. corporate socialist ; 흐름상 사회주의적인 가치를 추구하는 기업인들을 의미하는 듯함 [본문으로]
73. prioritize ; 2. [타동사][VN] (격식) 우선적으로 처리하다 [본문으로]
74. emissions scandal ; 얼마전에 있었던 폭스바겐이 배출가스를 속여서 사회적 이슈가 되었던 사건 [본문으로]
75. extravagant ; 3. (생각・연설・행동이) 화려한, 과장된 [본문으로]
76. nation-building ; 국가건설 [본문으로]
77. revive economy ; 경제를 활성화시키다, 되살리다 [본문으로]
78. sluggish ; 느릿느릿 움직이는; 부진한 [본문으로]
79. contest ; 2. ~ (for sth) (주도권이나 권력) 다툼[경쟁] [본문으로]
80. be caught in the middle ; 중간[사이]에 끼다, 샌드위치 신세가 되다; 모호한 상태에 빠지다 [본문으로]
81. pragmatic accommodation ; 실용적인 숙소 ;; 흐름상 문제에 대한 근본적인 해결책이 아닌 미봉책임을 "임시 거처" 라는 비유로 표현 [본문으로]