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May 29, 2003
Book Review: Saving the Corporate Soul & (Who Knows?) Maybe Your Own
    by William Baue

A new book recommends a series of corporate reforms that mirror those advocated by the corporate social responsibility and socially responsible investment communities.

David Batstone bases his book, Saving the Corporate Soul & (Who Knows?) Maybe Your Own, on the premise that there is such a thing as a corporate soul. While the law readily accepts corporations as persons, the notion that a corporation has a soul seems like more of a stretch, especially in the post-Enron era when corporate culture seems devoid of a moral compass. Luckily, the book sets forth a series of suggestions to remedy the crisis of confidence in corporate America regardless of whether readers consider corporations soulful or soulless.

The book's subtitle, Eight Principles for Creating and Preserving Integrity and Profitability Without Selling Out, only hints at its scope, as each principle is accompanied by a host of recommendations. At first glance, the principles themselves seem overly generalized and, well, a little loosey-goosey. Consider, for example, Principle One:

"The directors and executives of a company will align their personal interests with the fate of stakeholders and act in a responsible way to ensure the viability of the enterprise," states Mr. Batstone. Mr. Batstone is a founding editor of Business 2.0 magazine as well as a former CEO of a technology firm.

This sounds somewhat vacuous until Mr. Batstone enumerates the specific implications of enacting such a principle, which read like a wish list for corporate social responsibility (CSR) and socially responsible investing (SRI) advocates.

For example, he calls on companies to expense stock options. A stock option is an option to buy stock at usually a below-market price; a stock option is granted to an employee as an incentive to raise the market value of the company.

Expensing stock options means a company assigns a dollar value to the shares that employees are given the option to buy. A company would then recognize that dollar value as an expense it paid. A number of shareowner resolutions filed by SRI advocates and others this year ask companies to expense stock options.

One of the strengths of Mr. Batstone's style is that he backs up his suggestions with concise and concrete examples. In this instance, he cites the July 2002 decision by Coca-Cola (ticker: KO) to voluntarily expense options. Without bogging down his narrative trajectory, he explains that Coca-Cola valued the shares by asking multiple investment banks to place bids on the options. Those bids were used to calculate an average value for the shares.

Mr. Batstone's other suggestions similarly mirror requests made in numerous shareowner resolutions, such as those calling for independent directors and for splitting the role of CEO and board chair. Mr. Batstone calls the New York Stock Exchange's proposal to require listed companies to have at least half of their board members be independent "too tepid," but he does not stop there.

"Shareholders ought to have the right to nominate a slate of truly independent directors," he writes, echoing a measure the SRI community is currently promoting. "Surely large institutional investors--above all pension funds--would be eager to put forward the highest-quality individuals who would help to maximize company performance."

Mr. Batstone also deals directly with shareowner resolutions, advocating that shareowners should have more voice in corporate governance, in accordance with democratic ideals. He cites the example of Bristol-Myers Squibb (BMY), which has ignored the results of a resolution calling for annual board elections. The resolution has won a majority of votes for six consecutive years, including support from 69 percent of voting shareowners in 2002.

"Here's a modest proposal: shareholder resolutions that pass by 60 percent of the shares cast for two consecutive years should be binding," suggests Mr. Batstone.

Examples and recommendations such as these abound in the book, multiplying the eight principles into scores of relevant suggestions for infusing corporations with "soul." Quotation marks surround the term because it is extraneous to Mr. Batstone's argument. Those who agree that the corporate soul can be salvaged will find the recommendations particularly convincing, but skeptics of this notion will also find the book's argument compelling.

Looking past the book's call for the acknowledgement of a spiritual underpinning to corporate activity, the eight principles and their corollaries still function as a pragmatic blueprint for corporate reform.


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