It's been said that the most important invention of modern times is the corporation. And Colin Mayer agrees, saying the corporation is a “remarkable invention for bringing together the capacity and capability of mankind to work together to create phenomenal outcomes.”

Colin is a professor at the Saïd School at the University of Oxford, and was also the Dean between 2006 and 2011, helping to get the school off the ground. 

Colin sits down with Greg to discuss why the history of the corporation is so understudied, balancing shareholders and managers within a corporation, and the benefits of family firms.

Striking balance within a corporation

But then it's still very important that the company gets that balance between having the ability to control things centrally, but ensuring that that entrepreneurship, that innovation is not lost by delegating decision taking down the organization so that people have the legitimacy to pursue that innovation as well. 

Why some of Milton Freeman's theories about corporations don't work in modern times

Because it basically says that the company should do whatever it can to generate profits, irrespective of the impact that it has on its employees, its societies, its environment. So long as in the process of doing that, it doesn't violate laws or it doesn't lose its reputation.

And the consequence of that has been exactly what we've observed over the last 60 years as the movement towards profit gathered pace. And that is that the corporation has created a huge amount of wealth for some and in the process, intensified levels of inequality and social exclusion immensely, and had a devastating consequence on the environment.

And that is exactly what you would expect from a notion of what the purpose of a business is. It will do whatever it can to generate profit, irrespective of the impact it has on others, including the natural world.

Are family firms more risk averse?

There's certainly evidence that,, family businesses follow a conservative approach in terms of the extent to which they are willing to sacrifice the reputation of the penny and the family., And that element in terms of being interested in the reputation of the family is potentially a source of inhibiting innovation, entrepreneurship, and experimentation. But it's equally well a mechanism for ensuring responsibility on the part of the owners of a company.

So one of the interesting elements of the pandemic was, to what extent did different organizations respond by supporting those who are most vulnerable, during the onset of the pandemic and in particular, to what extent were they willing to support their employees? Well, One form of that conservatism that was demonstrated by family businesses was a strong willingness to recognize the importance of supporting their employees during that period, and really incorporating them as part of the wider family, in the organization.

Guest Profile:

• Faculty Profile at Saïd School at the University of Oxford
• Professional Profile at The British Academy

His work:

• Colin Mayer on Google Scholar
• Prosperity: Better Business Makes the Greater Good
• Firm Commitment: Why the corporation is failing us and how to restore trust in it
• Asset Management and Investor Protection: An International Analysis (Economics & Finance)