Peter Georgescu

Peter Georgescu arrived in this country as a penniless Romanian refugee and rose to prominence as the CEO of Young & Rubicam. It’s an American Dream success story that could not play out in today’s economic environment – one that is plagued with disappearing jobs, flat wages, and a shrinking middle class. In his new book, Capitalists, Arise!, Georgescu argues that the stark reality of our current economic malaise and social breakdown can be attributed, in large part, to the short-term thinking spawned by shareholder primacy.

With deeply sobering statistics and new research, Geogescu points the way toward a future that will only be possible with enlightened capitalism.

So, how did we get here?

• American business quickly and aggressively adapted to globalization by succumbing to the pressure to move jobs offshore.
• The business community passionately embraced technology to eliminate even more domestic jobs.
• Most importantly, corporations moved to keep wages – outside of management – almost flat for close to forty years.

Decisions and choices apparently made without a single care about how these decisions would affect our society. Combined, these corporate choices have diminished the buying power of the American public and lead to the decimation of our middle class.

The business industry has the most to gain from a healthy America, and the most to lose by social unrest and punitive taxation. According to Georgescu, business leaders can become a crucial part of the solution in two important ways:

• Invest in the actual value creators – the employees. Start compensating fairly, which means a wage that enables employees to share amply in productivity increases and creative innovations. Before the early 1979s, wages and productivity were both rising. Now most gains from productivity go to shareholders, and not enough to employees.
• Second, businesses must invest aggressively in their own operations, directing profit into productivity and innovation to boost real business performance. Today, too many corporations reduce investment in research and development and spend more on superficial brand building. As a result, we see a general decline in the value of their brands and other assets. This trend also retards new business, hampers growth of existing operations, and therefore reduces opportunities for job creation. To make up for those declines and anemic revenues, businesses buy back their stock (now at record levels) and thus artificially boost earnings per share.

Georgescu’s deepest hope is that fellow CEOs, executives and directors will take steps to push back against the pressures of shareholder primacy and begin to reshape free enterprise with a vision toward long-term profitability rather than short-term gain.