The Power of the Enterprise

Profits for Good?

In December 2021, I shared my mission at Next Act Advisors in a short video clip.? The events that informed my choice to work in the vibrant startup space after 25 years in corporate executive positions, led me to a professional opportunity at a disruptive technology firm in renewable energy and soon after as a corporate board director as audit chair and subsequent Private equity company boards and privately held companies.??

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At Next Act Advisors, I thread both the power of the enterprise with state-of-the-art governance practices. When working with clients I am an independent thinker bringing strategy to scale new business models. My call to action when working with company owners is : “why not start from the ground up with principles of profits for good while utilizing the principle of the joint -stock company, (in the U.S. a corporation or limited liability company)? with contributions to society through economic progress, while obeying the law and designed to make money? “?

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This blog explores the power of the modern enterprise. The current times see capitalism under questioning.? I share three perspectives to contribute to the ongoing dialogue on the “goodness” of the enterprise. Throughout the blog I advocate for good corporate governance, starting with the formation of the board, as one way forward to gain and maintain the franchise from society to continue to do business in an ethical and profitable manner.??

1. The Founder’s Sandbox is a podcast produced and sponsored by Next Act Advisors. The Founder’s Sandbox podcast has guests who like me, want to use the power of the enterprise – small, medium, or large- to build a better world with resilient, scalable and purpose driven companies guided by great corporate governance.? my guest Matthew Lopez, on the Founder’s Sandbox, leads Wolf and Snow, a fractional general counsel practice, working with startup companies, with a minimum of $ 1 million in annual recurring revenue, to scale their enterprises.???

? ? He shares insights on when to start discussions with your clients on setting up the board. ? “The question is when you add to the board, Matthew shares. Your work as a CEO is to identify and build relationships with people you trust, who are strategic and who bring gravitas.?

The worst thing to do is not build these relationships early on.?

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Have a board of four members and prepare for the institutional investor’s ask for a 5th board seat.”?

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2. Perspectives on Capitalism:??

A lifetime learner, I often return to the University of Chicago for electives and bring the latest in economic work including pricing, capital allocation, platform economics to the work I do with my clients. I was a bit surprised when recently invited to participate in a curated book club on Perspectives on Capitalism.? based on a course offered to full time MBA students at Chicago Booth. Its purpose is to take advantage of Chicago’s legacy of rigorous intellectual inquiry to examine viewpoints about “capitalism”, beginning with what that term means.??

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To participate one had to complete an application, including an essay, on our own perspectives on capitalism and how it may apply in the work we do.??

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As a corporate board director and working with companies as they scale and build their boards, I did not pass up the opportunity. When speaking the first day to my fellow classmates, I shared that as a Chicago alumni, I often find myself in conversations around the? Friedman doctrine. I comment that the full article must be read as often it is cited without the full text published in the New York Times article on September 13, 1970.????

In a “free enterprise, private property system a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”??

Into week five of the course, that will run through spring of 2024, the dialogue in format book club, is inspiring as my group of 10 classmates, share, often with differing opinions, our? real world experiences on what capitalism is, could be and even should be- informed by exhaustive reading and always with dialogue.?

3. “The Company” A Short History of a Revolutionary Idea and the PCAOB’s annual meeting??

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The Company A short history of a Revolutionary Idea was one of the reads for the Perspectives on Capitalism course.? Published in 2005, the authors are John Micklethwait and Adrian Wooldridge, journalists for the Economist at the time of publication.??

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Almost 18 years later, I could not but recall the Enron case while I was a graduate student at the University of Chicago in 2001. Sarbanes-Oxley Act? followed in 2002 and shortly after at a large public pharmaceutical company I began to implement SOX principles within a newly minted compliance function at corporate offices.??

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The failure of auditors, performing consulting functions from the same firm for the same company was one of the root causes of the Enron debacle. Among the measures of SOX compliance, Title I established the PCAOB (Public Company Accounting Oversight Board) to oversee the audits of public companies that are subject to the securities laws.?

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21 years later Chair Erika Williams, at the annual meeting of the AICPA (American Institute of Certified Public Accountants(and CIMA (Certified Investment Management Analysts) shared in her opening remarks a personal story about her grandparents and trust in the stock markets.?

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My path to the PCAOB starts with my grandmother. She and my grandfather were farmers in Alabama. And she quite literally kept what little money she had under her mattress.?

She didn’t trust it to a bank, let alone the stock market.?

So, when I became the first person in my family to go to law school, I chose to go into securities enforcement to hold wrongdoers accountable, and help bolster the integrity of, and breed confidence in, our capital markets.?

Because the problem with money under the mattress is that it doesn’t grow. Building wealth requires investing.?

But investing requires trust.?

And that’s where you come in.?

The modern auditing profession was born from the need to restore trust following the stock market crash of 1929 and the Great Depression.?

Almost a century later, the role of auditors in maintaining trust and confidence in our capital markets is as important as ever.?

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At Next Act Advisors, my mission is to work with company owners to practice?? good corporate governance. That starts by being informed of the function of a board – its primary functions include oversight of the strategy, hiring and firing the CEO and oversight of the compliance with legal, regulatory and financial requirements of the company.?

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If you are a founder and would like to learn more about board creation, or to share your experience in setting up your board, please reach out to me and stay tuned for the full podcast which drops on January 4, 2024.?

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Wishing you and yours a restful holiday – logged off from social media, with a good book in hand, surrounded by friends and family.?

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Warmly,?

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Brenda A. McCabe?

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#corporategovernance?

#boards?

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