April 3, 2011
Dean Nitin Nohria
Harvard Business School
Dear Dean Nohria:
My letter of March 28 challenged HBS to lead the universities and the country away from finance or shareholder capitalism towards democratic capitalism. This challenge is supported by evidence that democratic capitalism is not only moral but that it also maximizes profits in the long term.
HBS has a mission to “make a difference.” Assuming that the intended difference is positive, then radical changes in support of the democratic alternative are required. Unfortunately the difference HBS has made for several decades has been negative to the economy. HBS has provided Wall Street with thousands of bright young people who made extraordinary amounts of money managing the economy into the disaster. The devastation to millions of peoples’ lives will continue for too long.
Question: How did so many HBS-educated MBA’s look at balance sheets for so many years without someone recognizing that there were trillions of dollars of overstated values? Sarbanes/Oxley requires CEOs to confirm the integrity of the numbers and the process. Why are not more managers in jail?
On a more positive note, I would like to elaborate on two matters that were briefly mentioned in my earlier letter. First, the Carey Fellow in Democratic Capitalism is Christopher Mackin who is located in Cambridge. He earned his doctorate from Harvard Graduate School of Education in 1984 with this thesis: “The Social Psychology of Ownership: A Case Study of a Democratically Owned Firm.” Chris is a consultant to companies and unions around the United States on the issues of employee ownership, and is a member of the core faculty of the Harvard Trade Union Program now based at Harvard Law School. Chris is deeply involved with the Rutgers program described below and is available on short notice to “cross the bridge” to meet with you and your associates to explore further an HBS involvement in promoting the good capitalism.
In late February, there was an inspiring investiture ceremony at Rutgers when Professor Joseph Blasi became the J. Robert Beyster Professor of Employee Ownership, the first named chair in this study. Dr. Beyster was the founder of SAIC, a high-tech employees-owned company in San Diego. His daughter, Mary Ann Beyster is now president of the Beyster Foundation and works closely with the Rutgers Fellows program.
Joseph Blasi has written many books and articles along with Professor Doug Kruse. They are part of the Rutgers School of Management and Labor Relations, led by Dean David Finegold, and now have about 50 Fellows doing research at universities around the world. This is a unique network whose efforts could be enhanced by an HBS collaboration.
Worker ownership confuses many people who think of it as some form of socialism. It is, in fact, the most perfect application of Adam Smith’s free-market system including broad distribution of wealth to the wage earners who maximize the multiplier effect. Most know what ESOPs are, but few recognize that employees now own the majority of corporate America through various plans, including about 60 million owners with $2.3 trillion remaining in their devastated 401(k) accounts. This group of workers needs a new capitalism to benefit from their participation in capital ownership.
There is momentum now in democratic capitalism that could be greatly accelerated with an HBS involvement. Please let me know how you would like to explore this opportunity further.
Ray Carey ‘50