Peter Georgescu: Companies Must Bring All Stakeholders to the Table
The chairman emeritus of advertising firm Young & Rubicam explains why practicing one’s values “is a winning strategy in business.”
The Georgescu family, in New York City
For nearly his entire life, Peter Georgescu has been obsessed with the struggle of good versus evil in human nature. “Why is it possible for people, most of whom can also be loving and compassionate, to do terrible things?” wonders Georgescu, author of The Constant Choice: An Everyday Journey from Evil Toward Good and chairman emeritus of Young & Rubicam.
His curious preoccupation stems from personal experience: As a young boy in World War II-era Romania, Georgescu was subjected to human evil firsthand. His father, who managed the largest oil-producing region of Romania for Esso (which later became Exxon), and mother were in New York at Esso headquarters, when the Soviets dropped the Iron Curtain of communism on Eastern Europe. Georgescu’s parents were forced to stay in New York. His grandfather, a former Romanian governor, was arrested and murdered in prison. “Not long after his arrest, my 5-year-old brother and I were placed into hard labor,” he says. “For years I spent 10 to 12 hours a day, six days per week, cleaning sewers, as I was small enough to fit into the pipes.” Later, he was forced to do high-voltage electrical work. “I suffered frequent incidents of painful shocks that knocked me to the ground — that was my education! We were offered no schooling whatsoever.”
After six years, Georgescu and his brother were released with intervention from President Eisenhower and a congresswoman, Frances Payne Bolton, and came to America to be reunited with their parents. “My gratitude and respect for this country, with its bountiful freedoms, which are still the envy of the world, will never diminish,” he says. Yet as he worked his way through the business world, again he saw forms of evil — not the blatant human cruelty he’d experienced, but what he believes is a force more subtle and insidious. It was a “me first” attitude that all too often went beyond merely wanting to succeed above the competition, and became narcissistic greed and cheating, all in the name of “maximizing shareholder value.”
In the past few decades, he says, the corporate vision has increasingly narrowed to focus on short-term gains sought by short-term shareholders and financial institutions. “The other stakeholders — customers, employees, the surrounding community, the environment — are now largely excluded from the corporate, decision-making table,” says Georgescu, who graduated from Stanford Graduate School of Business in 1963.
But there is another, better way to strive to do good in business, just as people do in their personal lives. “Enlightened self-interest,” he calls it. “We have a choice to make every day, countless times a day, and we can choose between doing good, living by a higher set of values, or doing something that harms other people. Good intentions are simply not good enough. We must be responsible for the ultimate results of our actions.”
In addition to being the right thing to do, making decisions this way is good for long-term growth and success, he says. “The new winning companies — the Googles, the Apples, the Starbucks, and the Patagonias — are demonstrating how practicing values is a winning strategy in business, not merely because it’s the right thing to do but because it’s the only way that works now.”
Good for Employees
Providing a supportive, positive environment for employees fosters creativity and innovation, believes Peter Georgescu, MBA ‘63. (Photo by Elena Zhukova)
There’s an old business management book called The Customer Comes Second, which runs counter to the popular guiding principle of putting the customer first. “But it makes sense,” says Georgescu. “How can the employees treat customers with respect when the organization doesn’t treat them with respect?” Beyond basic decency and improved customer service, providing a supportive, positive environment for employees fosters creativity and innovation. By having a greater sense of fairness in the workplace, Georgescu says, companies can achieve “sustainable creativity,” an ethos practically required to achieve the level of innovation necessary to compete in today’s economy.
Good for the Corporation
“The average tenure of Fortune 500 CEOs is just over three years,” says Georgescu. With the shortened horizon, “investment in brand building is diminished in favor of short-term tactics to drive up sales and profits.” More companies need to be playing the long game in order to thrive into the future. Georgescu recalls a point in the mid-’90s, when he was CEO of Young & Rubicam, and management decided to take the company public. Senior managers held most of the company shares at the time. “The concern was that, assuming a successful IPO, a good many of these executives would retire and the next generation of management would not be enfranchised in the ongoing enterprise,” he says. With the future of the company in mind, the senior executives redistributed some 30% of their shares to the next generation of managers. The move helped with talent retention, as well as cemented a culture of sharing incremental results more broadly and deeply in the company, and, in the end, “proved to serve the enterprise, and all its stakeholders, including shareholders, very well.”
Good for the Community
The political and economic conditions of the past several years have caused a “huge socioeconomic chasm that threatens the U.S. and other developed nations,” says Georgescu. Several economists have predicted dire consequences for our entire way of life if we don’t address the issue of income inequality. While political action will be a necessary part of the solution, business leaders have an obligation to help, too, says Georgescu, by wisely balancing the interests of all corporate stakeholders. There is a better path to long-term success, he says. And it begins with the choices made today.
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