Lynn Sharp Paine is John G. McLean Professor and Senior Associate Dean for International Development at Harvard Business School. A member and former chair of the General Management unit, she previously served as Senior Associate Dean for Faculty Development and chair of the School’s required course on Leadership and Corporate Accountability, which she co-founded. Her current teaching assignments include Corporate Governance and Boards of Directors in the MBA program, as well as various executive programs including Making Corporate Boards More Effective, Women on Boards, Leading Global Businesses, Senior Executive Program for China, and Senior Executive Program for Africa.
Ms. Paine is a director of Atos SE (NYSE Euronext Paris), an international digital services company, and she recently completed two terms as a member of the Governing Board of the Center for Audit Quality in Washington, D.C. She is a Faculty Associate of Harvard University’s Safra Center for Ethics. For her innovative course development, she was given the Faculty Pioneer Lifetime Achievement Award by The Aspen Institute Center for Business Education. Ms. Paine has served as a consultant to numerous firms, companies, and industry groups, and sat on various advisory boards and panels including the academic council of the Hills Program on Governance, The Conference Board’s Blue‐Ribbon Commission on Public Trust and Private Enterprise after Enron’s collapse, and The Conference Board's Task Force on Executive Compensation after the financial crisis. She was a director of RiskMetrics Group from 2008 until it became part of MSCI in June 2010.
A summa cum laude graduate of Smith College, Ms. Paine holds a doctorate in moral philosophy from Oxford University and a law degree from the Harvard Law School. She practiced law with the Boston firm of Hill & Barlow early in her career. Prior to joining the Harvard faculty, Ms. Paine taught at Georgetown University Business School and the University of Virginia's Darden School of Business as well as National Cheng Chi University in Taiwan, where she was a Luce Scholar. She is a permanent member of the Henry Luce Foundation's Luce Scholar Selection Panel. She and her husband, Tom Paine, live in Wellesley, Massachusetts.
Agency theory, a new model of governance promulgated by academic economists in the 1970s, is behind the idea that corporate managers should make shareholder value their primary concern and that boards should ensure they do. The theory regards shareholders as owners of the corporation—but raises grave accountability problems: shareholders have no legal duty to protect or serve the companies whose shares they own; they are shielded by the doctrine of limited liability from legal responsibility for those companies’ debts and misdeeds; they may buy and sell shares without restriction and are required to disclose their identities only in certain circumstances; and they tend to be physically and psychologically distant from the companies’ activities. Joseph Bower and Lynn Paine examine the agency-based model’s foundations and flaws and its implications for companies before proposing an alternative model that would have at its core the health of the enterprise rather than near-term returns to its shareholders. Their model would refocus companies’ attention to innovation, strategic renewal, and investment in the future.
In 2014, the Allergan Inc. board of directors received a surprise takeover offer from Valeant Pharmaceuticals in alliance with hedge fund activist Bill Ackman's Pershing Square Capital Management. In the unprecedented arrangement between an acquirer and a hedge fund activist, Pershing Square had quietly amassed a 9.7% stake in Allergan prior to the Valeant bid, making Pershing Square Allergan's largest shareholder. The case presents students with many of the decisions Allergan's directors faced amid challenges to Allergan's governance, management, and business model. In particular, the Allergan board must decide whether to pursue a $10 billion acquisition of Salix Pharmaceuticals while under threat of a proxy contest and a special shareholder meeting to vote on replacing Allergan's directors with a slate more favorable to the Valeant merger. The proposed Salix acquisition would give Allergan a new therapeutic market but would also make Allergan too big for Valeant to acquire.
Market capitalism, a system that has proven to be a remarkable engine of wealth creation, is poised for a breakdown. That sounds dire, and it is. Increasing income inequality, migration, weaknesses in the global financial system, environmental degradation, and inadequate government and international institutions are just a few of the forces that threaten to disrupt global market capitalism in the decades ahead. In conversations with business leaders around the world, the authors found that virtually all of them shared a deep concern for the sustainability of the market system, but their beliefs about how to respond varied widely. Some said that changing their behavior would be unnecessary or even inappropriate. Others were unsure how to deal with issues seldom thought to be the responsibility of individual firms. The authors call for business to be both innovator and activist in protecting and strengthening market capitalism. Instead of seeing themselves as narrowly self-interested players in a system that is overseen by others, business leaders must spearhead entrepreneurial activity on a massive scale-devising strategies that provide employment for the billions now outside the system, inventing business models that make better use of scarce resources, and creating institutional arrangements for coordinating and governing neglected and dysfunctional aspects of market capitalism.
The spread of capitalism worldwide has made people wealthier than ever before and raised living standards to new heights. But capitalism’s future is far from assured. The global financial meltdown of 2008 came within a hair’s breadth of triggering another Great Depression. Despite stirrings of recovery, economies in Europe are still teetering. And powerful forces—income inequality, resource depletion, mass migrations from poor to rich countries, and religious fundamentalism, to name just a few—continue to pose a serious threat to the prosperity capitalism engendered.
How can the future of capitalism be secured? And who should spearhead the effort? Many observers point to government. But in Capitalism at Risk, Harvard Business School professors Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine argue otherwise. While the authors agree that governments must play a role in saving capitalism, they maintain that businesses should lead the way. Indeed, for enterprising companies—whether large multinationals, established regional players, or small start-ups—the current threats to market capitalism present vital opportunities.
Drawing on discussions with business leaders around the world, the authors identify ten potential disruptors of the global market system and diagnose the causes behind existing institutions’ inability to combat them effectively. They argue that companies must stop seeing themselves as bystanders and instead develop innovative business strategies that address the disruptors, produce profitable growth, and strengthen institutions at the community, national, and international levels. The authors then present examples of companies that are already making a difference.
Filled with rich insights, this provocative new book presents a compelling and constructive vision for the future of market capitalism.
More and more companies recognize the importance of corporate responsibility to their long-term success—and yet the matter gets short shrift in most boardrooms, consistently ranking at the bottom of some two dozen possible priorities. Many years ago labor conditions in Asian contract factories prompted Nike board member Jill Ker Conway to lobby for a board-level corporate responsibility committee, which the company created in 2001. In the years since, the committee has steadily broadened its purview, now advising on a broad range of issues including innovation and acquisitions in addition to labor practices and resource sustainability.
A close examination of Nike’s experience has led HBS professor Lynn S. Paine to conclude that a dedicated board-level committee of this sort could be a valuable addition to many if not most companies in at least five ways: as a source of knowledge and expertise, as a sounding board and constructive critic, as a driver of accountability, as a stimulus for innovation, and as a resource for the full board.
In an accompanying interview with Paine, Conway discusses the committee’s creation and provides an insider’s perspective on what has made it so effective.
Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance
Today, corporate accountability is as vital to the bottom line as an effective business model. Value Shift makes a strong case for the merits of corporate responsibility and shows how a value-positive orientation contributes to superior performance through better risk management, improved organizational functioning, increased shareholder confidence, and enhanced public standing. Lynn Sharp Paine offers strategies for implementing an enterprise-wide value system and provides the tools need to build companies that can prosper in the new era of corporate accountability.
Value Shift articulates exactly why the superior performers of the future will be those companies that can satisfy both the social and financial expectations of their constituencies. By explaining the larger forces driving the current focus on scandals and ethics, Value Shift points to a new era in the corporation’s development and shows what managers can do to align their companies’ performance with the higher standard expected today.
An extensive global survey by three Harvard Business School professors finds that employees agree on core standards of corporate behavior; but meeting those standards will require new approaches to managing business conduct. The compliance and ethics programs of most companies today fall short of addressing multinationals' basic responsibilities, let alone such vexing issues as how to stay competitive in markets where rivals follow different rules. Companies must bring to the management of business conduct the same performance tools and concepts that they use to manage quality, innovation, and financial results.
A Practical Guide for CEOs Managing Multinational Corporations in the People's Republic
To achieve growth and profitability in the world's third-largest economy, multinationals need strong leadership--but China is tough on top executives. Pulsating with opportunity, China attracts foreigners, yet HR professionals continue to rank it as one of the most challenging destinations for expatriates. Many executives sent to lead operations in China are ill equipped to tackle the country's unique challenges. And it's hard to overcome that handicap, because leading in China calls for skills that go beyond--and in some cases conflict with--standard business teaching and practice. Foreign executives must be adept at reworking management orthodoxies in real time to do well there. Success requires cultural understanding and adaptability, market knowledge, the ability to sense and respond to rapid change, and support from headquarters. Most importantly, effective leaders have the crucial ability to play roles that Westerners often view as contradictory: they are strategic yet hands-on; authoritative yet nurturing; and action-driven yet circumspect. Above all, they have the intellectual dexterity to develop new frameworks and capabilities to meet China's particular circumstances. This article illustrates how CEOs have modified accepted wisdom to tackle their biggest challenges in China. Though some of the lessons may seem like common sense to experienced China hands, they're anything but to a freshman expat.
