In recent years, there have been some significant changes in how companies have responded and adapted to the shareholder centric worldview that many corporations have operated in. These changes can largely be seen as responses to problems arising from two interlinked challenges. First, an over-emphasis on shareholders and their interests, such as generating a higher return on equity. Second and equally important, there's a significant concern about too much emphasis on measurable short-term financial metrics that are primarily financial. In response to these challenges, modern companies have done a number of things. First, they have sought to explicitly broaden their mission to include such things as corporate social responsibility and sustainability goals. So these companies are explicitly putting shareholders on notice that they're going to pay attention to a set of other stakeholders as well, and moreover, they will be paying attention to some of the long run impacts through sustainability goals for example of the company's actions. Many companies have now set themselves the goal of being carbon-neutral in their operations. For example, in response to the climate crisis, many companies have also adopted performance measurement systems, such as the balanced scorecard, that go beyond short-term financial or accounting metrics. The balanced scorecard, which has become extremely popular in business, includes metrics related to customers, operations, and the organization. In addition to financial metrics in order to provide a more holistic performance and health assessment of the company. I will not get into a detailed overview of the balanced scorecard here. There are many excellent online resources for this, but I want to emphasize for you again that it incorporates the interests of multiple stakeholders and consideration of the long run health and success of the company. Another important development has been the rise of Ecosystem strategies or Ecosystem thinking in business. The idea of a business ecosystem was introduced first in an article by James Moore in the Harvard Business Review in 1993. Moore's core idea was that firm should not be viewed simply as members of an industry, but as members of a business ecosystem comprising of various interacting organizations and individuals such as suppliers and complementors, and even government entities and customers. Within this broad Ecosystem, cooperation and partnership with others, which we can now think of as stakeholders, are especially important for the long run success of companies. There are many examples of such business ecosystems that one can think about. Shopping malls is an old example, but Ecosystem thinking has become especially important for highly successful, technology enabled businesses that have taken the form of platforms, whether you think of Google, Amazon, Facebook, Apple, or Alibaba, all have created businesses where multiple other players interact with each other on their platform in order to create value. Even Coursera, as an online education platform, essentially has the same platform based model. In all these cases, the companies have to carefully and consciously think about all the stakeholders they need to bring together within their ecosystem, how to attract them, how to keep them committed, how to balance their different interests and goals, and how to ensure that the ecosystem as a whole continues to provide value and outcompete others. In short, ecosystem strategies are at the bleeding edge of modern stakeholder management, which can be seen in the ongoing rapid growth of the use of the term ecosystem in business press coverage, as can be seen in this graph. Another response from managers to the dilemma of shareholder centric capitalism has been to seek some degree of protection from, from not for shareholders. The more traditional approaches to this include things like poison pill provisions, which make it difficult and costly for shareholders to replace the company's management. For example, in 2012, Netflix's Board adopted a poison pill whereby the company would issue a large number of shares in the market if any shareholder acquired more than say 10 percent stake in the company. At the time, the company was being pressured by Carl Icahn, a well-known activist shareholder who had been buying up shares of Netflix and wanted the company to focus a lot more on short run profitability. Another common approach in recent years has been to take the company private so as to shield it from the whims and pressures of the public financial markets. This has of course, led to huge growth in the private equity industry. Another place the same approach of shielding companies from the public markets has surfaced, isn't the rise of so-called Unicorns. Unicorns are startup companies with valuations that exceed a billion dollars and are called that because they're supposed to be extremely rare. But in recent years, the availability of cheap funding and the desire on the part of company founders to avoid shareholder scrutiny has led to a flood of Unicorns. What was supposed to be a rare phenomenon has now become very common indeed. Last but not least, even in public companies, you're increasingly seeing two classes of shares where the publicly traded version has fewer voting rights, and the voting rights are closely held by a core group that typically includes the founders of the company. This group typically have a set of so-called preference shares. The idea here is that these founders will serve as the guardians of the long-term interests of the company and act in good faith to protect these long-term interests. But there are significant concerns about these approaches as well. Both the large quantities of private equity that are not subject to the market test of being vetted by multiple analysts and investors, and the reliance on founders and their ilk to somehow protect the firm's value. The spectacular collapse of WeWork's, IPO, is a cautionary tale that these approaches to dealing with shareholder primacy may have significant downsides as well. WeWork's largest investors, Soft Bank had to pay over a billion dollars to buy our founder CEO Adam Neumann's dual crosshairs, which gave him the majority of votes on the board in order to eventually take control of the company, and it is still not clear how much value there isn't WeWork. The general consensus seems to be that Soft Bank and other private investors likely made a huge loss on their investment. That brings to a conclusion this module, as well as this MOOC on corporate strategy, I hope it has been a fun and rewarding experience for you as it has been for me in putting it together. I hope you've learned a lot of things that would be useful to you, and don't forget to share the light of knowledge with others. As Master Yoda wisely says, pass on what you have learned. I look forward to seeing you again in the force.
