Corporate leaders suffer under the capitalist gun
Pity Indra Nooyi. When she won the coveted post of CEO at PepsiCo Inc. in 2006, she indicated she wanted to shift Pepsi from snack foods to health foods and from caffeinated colas to juices.
“It doesn’t mean subtracting from the bottom line,” she argued: The company would simply bring together what is good for business and good for the world, making money by doing good.
It sounded glorious. But a moment of truth came on July 21, 2011, when PepsiCo had to revise downward its guidance for the year’s earnings per share. It had still done well in the previous quarter, with lots of signs of growth. Because of the desire to continue growing, Ms. Nooyi fended off calls to reduce staff in a quest for greater productivity, which she said would leave remaining employees working harder and more likely to face burnout.
But the stock price tumbled and analysts savaged her for failing to attack costs and supposedly neglecting the carbonated products. “Is she ashamed of selling carbonated sugar water?” a bottler told the Wall Street Journal.
Maybe you don’t pity Ms. Nooyi, figuring that CEOs deserve all the criticism they get, in return for their gargantuan salaries. But Yvan Allaire, a former senior executive at Bombardier Inc. and now chair of the Institute for Governance of Private and Public Organizations, and Mihaela Firsirotu, a professor of strategy at the University of Quebec, believe the PepsiCo chief’s situation epitomizes what’s wrong with capitalism today.
In A Capitalism of Owners, they say the judgment against Ms. Nooyi, by the analysts and stock market, was that she “has too much of a social conscience. That may be good for the company in the long run but not for today’s and tomorrow’s stock price. If she persists, she should be replaced by someone who does not have these qualms.”
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By Yvan Allaire and Mihaela Firsirotu
(IGOPP, 184 pages, $29.95)
surely the truth is in the middle
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