Former Goodyear Chairman Robert Mercer was fond of saying that Wall Street's insistence on putting the shareholder first is backward thinking.
Mercer insisted companies should put their constituencies in this order: customers, employees, suppliers, government entities and then shareholders. He believed if the first four were handled properly, the fifth constituency-the shareholders-would make out like a bandit.
He emphasized giving employees a decent place to work, good wages and a stimulating workplace. Mercer felt that given this environment, employees will provide companies with the quality and innovation needed to satisfy customers.
In today's business world-particularly among publicly traded global companies-the work force doesn't get nearly this much respect. Some argue a firm's only mandate is to make money for shareholders; that providing good, secure jobs for employees isn't a priority. Often, even making a decent profit isn't enough-the company must meet the expectations of analysts or the stock will take a hit.
Workers have it better with private companies, but even they are under constant cost pressures from customers, suppliers and competitors. They, too, must look closely at the labor component of their business and determine whether chasing low-wage alternatives in place of domestic manufacturing is a viable option.
The top priority of the United Steelworkers' leaders is to protect the jobs of the union's members. However, they do make a valid point that a system is destined to fail when one main stakeholder-in this case the shareholders-is served to the detriment of the others.
When the only measure of success is quarterly profits, the long-term vision needed to invest in people and research and development can get lost in the shuffle. Patience isn't rewarded, particularly when the CEO knows that too many financial reports ``below expectations'' will put the executive's head on the chopping block.
The domestic auto industry gives an example of both sides of the coin. The ``Big Three'' auto makers continue to see their market share slip away, greatly impacting suppliers tied to them. On the flip side, transplant firms such as Toyota, Honda and others are thriving while showing loyalty to such constituents as workers and suppliers.
It's clear that when done right, the Mercer way of doing business can still work today.