The Aspen Institute’s Judy Samuelson has had a career considering the impacts of capitalism from different vantage points—from the halls of the California state legislature to business school, a stint in banking, running impact investment at the Ford Foundation, and now in charge of the Business and Society Program at a leading think tank. In this interview, Ethisphere’s Kevin McCormack talks with Samuelson about her new book, The Six New Rules of Business: Creating Value in a Changing World.

Kevin McCormack: What can you tell us about your career journey and how all of your experience, which you’ve shared so elegantly in the book, has set up your ideas?

Judy Samuelson, Executive Director, Aspen Institute Business and Society Program

Judy Samuelson: I started out working in the state legislature in California after college, and went to business school because I was trying to understand the role of the private sector in things that I had an interest in like economic development. Then I went into banking to go deeper into the business language, and ended up at the Ford Foundation running their impact investing program. Looking at society from these different lenses was part of the journey, to understand the various trade-offs. People talk about a win-win world, but I think there’s too much magical thinking in the world of investment about being able to honor your values and still make a lot of money. And I think at some level, these tensions have been playing out for me for a long period of time.

Kevin McCormack: You’ve compiled so much institutional knowledge over the years, working in the financial markets, the Ford Foundation, at the Aspen Institute. In planning this book, is there anything that ended up on the cutting room floor that you wish you could have included?

Judy Samuelson: I often get the question, “Wow, who’s really signing up to these rules?” And I always respond, “Let’s talk about the companies who seem to have always lived by these rules.” The catalytic event that put me on the course of leaving the Ford Foundation and starting this program was something called the Corporate Involvement Initiative. We started saying, “What do we learn from companies that seem to be ahead of the curve?” They seem to be operating in a more natural way at the intersection of what’s healthy for the business and healthy for society.

We emphatically were not looking for acts of charity. What we were talking about and where the greatest leverage is lies in the business model itself. When we saw companies that seemed to have that, but they still maintained a consciousness about the health of society at the same time, we wanted to learn from it. So that really started me on this path.

Kevin McCormack: You were still writing this book when the world spiraled into this pandemic, and then we had the killing of George Floyd. Did any of this influence your thinking?

Judy Samuelson: Yes and no. The pandemic has exposed the humanity of firms in a way that has become more present. Somebody said to me the other day that it’s as if we’ve drained the pool and have seen more of what actually lies at the bottom—it’s not always pretty, but it’s real. During the pandemic, we were up close and personal with these remarkable stories about essential workers providing critical business services, from healthcare to retail, and bearing the brunt, and were they getting their share? Were the real value creators receiving the real value that they deserve for their services? The other key event unfolding as I turned in my first draft was the Business Roundtable having redefined the corporation in August 2019.

Judy Samuelson’s new book, The Six New Rules of Business: Creating Real Value in a Changing World, is now available online and at your local bookstore.

Kevin McCormack: We could spend weeks talking about all six rules. Let’s focus on one rule in particular, rule number four: Employees give voice to risk and competitive advantage. Do companies and their leaders, as part of the long-term vision and strategy, need to apply more focus on their own people?

Judy Samuelson: Absolutely. Employees are the best allies. They want the company to flourish. They want it to be financially successful, because in theory, that rebounds to their own financial security and economic opportunity. They’re also a lens into both risk and opportunity for the company. They’re closest to the action. They’re the ones who are managing the complexity of the supply chain, they are the customer interface. They’re the ones who have their eye on product quality and service. How can we not rely on them?

What’s different now is the power to connect with social media. I think it is true that employees today tend to wear their heart on their sleeve a bit more, but it’s the ability to communicate more effectively, to find peers, to build coalitions, and to lean in on a question for a period of time until a path forward becomes clear. Those things are all enabled by collaboration tools that we teach employees to use.

An employee is the bridge between the inside and the outside. Work-life balance, people wanting to be the same person on Monday as they are on Sunday, all of those metaphors—employees have things that are keeping them awake at night, and it is natural for them to want the executives of their enterprises to speak to those questions. That’s remarkably complex for a CEO to do well, but we have abundant examples today.

Kevin McCormack: Is it fair to say that those companies that hold themselves out as most accountable for their actions are the ones that are using their employees as a barometer?

Judy Samuelson: I certainly think that we’re starting to see a change in the nature of CEOs, with a different generation emerging that is more comfortable with speaking to these questions. We’re bringing politics into the workplace like we’re bringing politics into everything else in this country at this point. One of the most stunning examples was the speed with which companies hit the pause button on political spending after January 6th. That was a result of employees speaking out. There are still a number of issues that feel like real third rail issues that executives may choose to stay silent on, something that another company will be outspoken about. So, it’s part personality, it’s part values, it’s part the nature of the workforce that you have.

Kevin McCormack: Rule number four is very closely intertwined with number five: Culture is king and talent rules. That’s also very much about the employee. What do you see as the necessary step forward for talent creation and retention for companies?

Judy Samuelson: First, let’s remember the old rule—capital is king. The new rule is that culture is king. It takes us back again to ask, what actually is critical to our long-term success? The fact is that financial capital is not a scarce resource anymore. One has to ask, “Why is there so much noise from the public capital markets?” And I think there’s a real tension here between the natural conversation that’s emerging right now around disclosure. What will the SEC require, as it responds to investors clamoring for more information? If we’re not careful, we end up leaning into metrics that make it easy to make comparisons on some critical but straightforward issues like climate goals or greater diversity in the boardroom. But we also need metrics that help companies analyze and ascertain where they are vis-a-vis their own desire to make progress. That’s what the bigger conversation is about today.

Why do we have corporations? Corporations were not created to maximize returns to shareholders. It’s always been a part of the puzzle, but they’re created to get things done that you can’t do by yourself. That’s why we in the public grant corporations with the license to operate. And increasingly, a robust culture is the story that we see in companies that are high performing, that are conscious of stating what they’re about and what they exist to do, that connects them back to the public in some way, shape, or form.

Morgan Stanley put out a great piece called “Culture Quant,” and they have found that retention is a great window into culture and that it’s measurable. There is a very high correlation between high retention rates and alpha. This balancing act of culture and talent versus capital requires us to start getting clear about what we’re trying to measure.

Kevin McCormack: How do you think curriculum needs to evolve to prepare future leaders? And how might you design a structure or an executive curriculum around the impact of employee investment?

Judy Samuelson: One of the things that’s abundantly clear from recent decades, as we’ve moved from a bricks and mortar world to the technology world, is that you can no longer find the value of the company on the balance sheet. The discounted cash flows tool in the toolbox has lost a lot of usefulness in a stock market that can’t figure out what the valuation is, compared to what we’re experiencing as a country. Something like 85% of valuation is based on intangibles. It’s about reputation, it’s about trust. Trust, trust, trust. You can’t say that one enough. It’s about your ability to defend your intellectual property, your ability to attract and retain that talent. Measuring, understanding, and unpacking those things is where you start to see the outside and the inside of companies merge. In a connected world where we see existential crises where business needs to be at the table, these things start to be fodder for trying to drive change inside the enterprise.

So, business schools need to be able to teach to the limits of growth. It’s just been part of the mantra, profits and growth. What does that mean when we’re running out of natural resources, or where growth is a recipe for carbon? Those things become real. We have a way to go in finance classrooms. One of the conundrums for business schools is that the financial sector is such a big part of the noise, they loom large in commanding certain kinds of skills that may be useful in the first couple of years on the job. They’re not what you need when you move up the food chain. Who are we teaching? For what kinds of jobs and for what point in somebody’s career? Not just for the first couple of years.

Kevin McCormack: We talked a little bit about employee activism. I’m curious about activist CEOs. Will this become more commonplace, whether CEOs are self-motivated or because their stakeholders or society at large are now expecting it?

Judy Samuelson: CEOs now, they’re really leaders of communities in some respects. The job is dynamic, there are lots of communities of interest that are engaged and at the table and expect to see their imprint on the firm. You add in the ecosystem that business operates in and that it influences by its decisions, it’s becoming a much more complex job.

The other big activist shift is in the world of business coalitions, talking about the Business Roundtable. In recent years we’ve seen quite a shift as the Business Roundtable, which of course represents our largest corporations and big brands in the US, leans in on questions where there are winners and losers from the business perspective. They’ve been building coalitions, as opposed to handing the microphone to X company when their biggest asset is the risk. They’re talking about workforce development, or they’re talking about racism, or they’re talking about some of these issues that cut very close to society’s ability to operate, such as climate change.

Kevin McCormack: Once you have that chance to get in a room again with the diverse range of business executives, what will be the first page you tell them to turn to?

Judy Samuelson: I’m thinking about the story about Lee Scott at Walmart. Hurricane Katrina hit New Orleans, and they sent the trucks to the center of the city after the National Guard lifted the barriers to provide essential goods to people who were stranded. It wasn’t a pretty picture. I think none of us who weren’t there have any idea just how horrific that actually was. And Walmart got a lot of positive press because they were at the table, and we all saw it on the front page of the paper.

That was a moment where the company stood back and said, “Wait a minute, how do we get more of this kind of press?” But they didn’t go do more charity. Lee Scott understood, or maybe he could finally listen to his employees and heard something that had a huge impact, which was, “We need to be the best we can be all the time, given our massive footprint and our remarkable ability to convene the supply chain. How are we going to deploy this, and to what ends?” And they made remarkable commitments on everything from energy use to dematerializing packaging, to assuring that their products were meeting a higher standard in terms of sustainability, and on and on. And they’ve stayed at it since.

It’s a remarkable testament to how executives take in information and to what actually puts them on the path. This was not data, facts, or the business case. They had been under pressure for a decade. He saw a moment to break through, and he moved the company forward, and it was a real leadership moment. That’s the story I’d love all of the CEOs to read.

Kevin McCormack: My last question is, what would you anticipate that the same room of executives might want to rip out of your book?

Judy Samuelson: I’m going to find it…page 67. It’s a box, “What Matters Most: The Key Tests of Business Commitment to Purpose.” It names what I call blind spots. What are the things that, if I’m sitting outside the firm, I want to better understand? How much is this company really leaning into the question of a license to operate and a purpose that is meaningful to the public at large? It asks questions that are very difficult to answer. How much is our company spending on tax avoidance? That says a lot about how the company is actually conceptualizing the relationship between business and society. What purpose is served by share buybacks? What’s the intention? What’s the right share for shareholders, and how much should be retained to reinvest in the company and its employees? The wicked truth is that over the last decade, over 90% of profits had been returned to shareholders. That doesn’t leave enough to invest in employees, and we can see what the result of that is.

What are the lobbyists, and the lobbyists for trade associations that we’re a part of, doing in our name? Is that consistent with what we’re saying about our purpose, our intentions? What is the story we want to be able to tell about job creation? What are we missing when we’re contracting out employees? Do we have sight lines through to make sure that our values are being honored by those that work in our name, but are not on our payroll? Then ultimately, what is a CEO paid to do? If the stock price is allowed a signal in the pay package, then we’re working at cross purposes with the intentions that were laid out by the Business Roundtable.

Kevin McCormack: Tough questions. That’s fantastic. We’re not going to rip out page 67, although maybe others will disagree. I love the entire book.

About the Expert:

Judy Samuelson is vice president at the Aspen Institute and founder and executive director of the Aspen Institute Business and Society Program. She previously worked in legislative affairs in California and banking in New York’s garment center and ran the Ford Foundation’s office of program-related investments. Samuelson blogs for Quartz at Work and is director of the Financial Health Network.

Kevin McCormack is the Senior Vice President and Executive Director for the Business Ethics Leadership Alliance (BELA) where he guides the strategic advancements for the BELA community in the US and key international markets, the expansion of executive leadership participation across the community, and the immersion of BELA members in global programs. Kevin has a history of working with the BELA community and additional business and compliance leaders around the world as he continues to oversee Ethisphere-hosted assemblies throughout the United States and regionally in Asia, Latin America, and Europe.