“E
achofourstakeholdersises-
sential.” Those words were part of
a declaration signed last August by 181
bosses of big American companies
belonging to the Business Roundtable
(brt), an eminent lobby group. It
seemed to represent quite a u-turn—
nothing short of a repudiation of Amer-
ica Inc’s shareholder-first orthodoxy.
As investors pour billions into funds
promoting environmental, social and
governance objectives beyond profit-
ability, a vision of a cuddlier capitalism
has taken hold.
Or has it? In a new paper Lucian
Bebchuk and Roberto Tallarita of Har-
vard Law School pore over data from
the companies of some of the brt
signatories and find little evidence (so
far) that the declaration has altered
corporate behaviour. For example, they
found that only three of the 20 compa-
nies whose ceos sit on the brt’s
board—Boeing, Stryker and Marriott—
have amended their corporate-go-
vernance guidelines in any way since
the declaration. And none of the
amendments had anything to do with
stakeholder welfare, the authors say.
The latest data on incentives sug-
gest shareholders come first. The 20
firms’ non-executive directors earn an
average 56% of their compensation in
the form of equity stakes, which are by
definition driven by shareholder value;
87-95% of their bosses’ pay is tied to
performance. Only Duke Energy, East-
man and Marriott tie bonuses to a
quantified stakeholder metric—and
only in a limited way. Eastman includes
three measures of employee safety, but
it is up to the compensation committee
to decide what weight to assign to each.
The firms’ hands may have been
tied. Fully 70% of the brt statement’s
signatories are incorporated in Dela-
ware, whose corporate law is share-
holder-friendly. The state’s former
chief justice goes so far as to argue in a
recent article that “within the limits of
their discretion, directors must make
stockholder welfare their sole end”.
This need not be a problem, Messrs
Bebchuk and Tallarita think. Farsighted
bosses have always known that pro-
moting long-term shareholder value
requires delivering for customers and
treating workers and suppliers reason-
ably. It is unclear if the same can be said
of championing fuzzy stakeholderism.Going in circles
Corporate purposeNEW YORK
A case against stakeholderism52 Business The EconomistMarch 14th 2020
C
orporate computingis supposed to
solve problems, but often creates new
ones, which have to be mended with more
it. These fixes create yet more problems
and so on. The newest layer of it geology is
the “multi-cloud”. On March 10th vmware
became the latest big software-maker to
unveil its contribution.
The computing cloud is old hat. Most
companies use at least one business ser-
vice provided over the internet, be it raw
number-crunching or web-based applica-
tions. In all, businesses spent nearly
$230bn globally in 2019 on the cloud, ac-
cording to Gartner, a research firm, and
could splurge as much as $355bn in 2022.
The lion’s share goes to three market lead-
ers: Amazon Web Services (aws), Microsoft
Azure and Google Cloud.
Yet individual firms tend to use more
than one cloud provider. Plenty employ
dozens of them. They fear shackling them-
selves to just one—or, in the words of Pat
Gelsinger, vmware’s chief executive, “they
don’t just want to have a new ibm main-
frame called aws”. And they have diverse
needs, related to specific digital tasks, nec-
essary redundancy or compliance with
data-localisation requirements. All this
means that—in keeping with another eter-
nal it constant—their technological infra-
structure is fragmented.
Enter the multi-cloud. The basic idea is
to create an overarching, unified plat-
form—a cloud of clouds, if you will. One
approach is the “hybrid cloud”, which com-
bines a customer’s own computers with
the ones operated by, say, aws. Another is
to connect applications hosted by different
cloud providers.
The third, which vmware promises, is
the multi-cloud holy grail: to allow compa-
nies to shift computing workloads easily
from one provider to another, depending
on things like price, reliability and distance
to the customer. This task has been made
considerably easier by Kubernetes, an in-
creasingly popular piece of open-source
software that packages computing tasks in
standard digital containers and allows
firms to manage these, as if they were the
commander of a container vessel (kuber-
netes is Greek for “helmsman”).
vmware’s offerings look particularly
ambitious. It already helps companies run
their local computer systems but now
wants to be the main pilot to assist them in
navigating their dispersed clouds. With asimilargoalinmind,lastJuly ibm acquired
Red Hat, whose software resembles
vmware’s. The big three cloud providers are
also getting into the game, albeit more gin-
gerly for the time being. Google’s multi-
cloud technology is called Anthos. Amazon
and Microsoft have launched, respectively,
aws Outposts and Azure Stack, which let
firms build local clouds that are then con-
nected to the firms’ bigger remote one.
Both companies also have agreements with
vmware, which enable the firm’s custom-
ers to run its software on aws and Azure.
These deals point to another iron rule of
it: always try to turn your rivals’ competi-
tive advantage into a commodity. If
vmware and ibm are trying to create an
über-cloud, it is to turn the big three into
mere peddlers of cheap computing power.
This strategy is not guaranteed to work,
warns Mark Moerdler of Bernstein, a re-
search firm. The number of companies that
really need to move their workloads
around seamlessly is small, he argues. And
the multi-cloud’s universality comes at the
expense of specificity. It is, for instance,
unable to accommodate the entire suite of
features, some of them proprietary, offered
by each of the big providers. Many custom-
ers would hesitate to forsake such benefits.
That leaves one last, related question. Is
the perennial it promise of “write once,
run everywhere” realistic? It was supposed
to work for Java, a programming language,
and the software written in it was predicat-
ed on this idea. It proved tricky in real life.
“There has always been this dream, on the
West Coast in particular, that we should
live in a Utopia where all the vendors are
interchangeable,” quips Lydia Leong of
Gartner. The multi-cloud may be here to
stay. But do not expect it to cover the entire
computing sky any time soon. 7SAN FRANCISCO
A new formation is rising in the
computing skiesCloud businessAltocumulus
Outlook is multi-cloudy