Leading Global 1000
Course Number 2013
Assistant Professor George Serafeim
Fall; Q1Q2; 3 credits
Grade: 60% class participation and 40% final project
Globalization has concentrated economic power within a group of large companies who are now able to change the world at a scale historically reserved for nations. Just 1,000 businesses are responsible for half of the total market value of the world's more than 60,000 publicly traded companies. They virtually control the global economy. Consider how quickly this situation has emerged. In 1980 the world's largest 1,000 publically listed companies made $2.64 trillion in revenue, or $7.0 trillion in 2011 dollars, adjusted using the consumer price index. They directly employed nearly 21 million people, and had a total market capitalization of close to $900 billion ($2.4 trillion in 2011 dollars), or 33 percent of the world total. By 2011 the world's largest 1000 companies made $34 trillion in revenue. They directly employed 68 million people, hundreds of millions in their supply chains, and had a total market cap of $30 trillion. These companies and their supply chains have an enormous impact for both good and ill on society. They create goods and services for customers, wealth for their shareholders, and jobs for millions of people. They also consume vast amounts of natural resources, pollute the local and global environments at little or no cost, throw economies into recessions due to poor risk management, and, in some cases, hurt employees' well-being if wages and working conditions are inadequate.
Governments, consumers, investors, and civil society are putting unprecedented pressure on the Global 1000 to adapt their business models to create value for all stakeholders and reduce negative externalities. At the same time, public companies are under constant pressure to deliver increasing profitability to satisfy investors by increasing stock prices and paying dividends. In this multidisciplinary course we will explore business model threats and how they arise from social pressures, impediments to allowing companies to adapt, the innovations that need to take place in order for a company to adapt, and how the ecosystem of institutions in which corporations reside can help the adaptation process. We will explore issues such as resource scarcity, conflicting regulatory regimes, resource allocation and capital budgeting, corporate reporting, employee motivation, consumer behavior, corporate governance, and short-termism. The classes in this course feature case discussions, lectures, and "brainstorming sessions." The students will read both academic research and practitioner articles. The main unit of analysis in this course is the Global 1000 and large institutional investors and the main dependent variable of interest is long-term growth and return-on-capital.
This course should be of interest to students that want to work for or with Global 1000 firms, to students that will work for institutional investors that provide capital to Global 1000 firms, and to students working for organizations, such as consulting firms and investment banks, that advice the world's major corporations and institutional investors.
There are four educational objectives for this course. First, we will study the increasing pressure that large companies are under to deliver financial performance by minimizing the negative externalities that they impose on other organizations and society. Second, we will explore the barriers that companies are facing when they are trying to improve multiple dimensions of performance at the same time. Third, we will explore the ways companies are adapting their business models to reposition the firm for future success. Fourth, we will discuss developments in the ecosystem around the firm (e.g., the investment community, auditors, standard setters, rating agencies, etc.) that help a company to adapt.