Profits Without Prosperity
by William Lazonick
Though corporate profits are high, and the stock market is booming,
most Americans are not sharing in the economic recovery. While the top
0.1% of income recipients reap almost all the income gains, good jobs
keep disappearing, and new ones tend to be insecure and underpaid.
One of the major causes: Instead of investing their profits in growth
opportunities, corporations are using them for stock repurchases. Take
the 449 firms in the S&P 500 that were publicly listed from 2003
through 2012. During that period, they used 54% of their earnings—a
total of $2.4 trillion—to buy back their own stock. Dividends absorbed
an extra 37% of their earnings. That left little to fund productive
capabilities or better incomes for workers.
Why are such massive resources dedicated to stock buybacks? Because
stock-based instruments make up the majority of executives’ pay, and
buybacks drive up short-term stock prices. Buybacks contribute to
runaway executive compensation and economic inequality in a major way.
Because they extract value rather than create it, their overuse
undermines the economy’s health. To restore true prosperity to the
country, government and business leaders must take steps to rein them
Five years after the official end of the Great Recession, corporate
profits are high, and the stock market is booming. Yet most Americans
are not sharing in the recovery. While the top 0.1% of income
recipients—which include most of the highest-ranking corporate
executives—reap almost all the income gains, good jobs keep
disappearing, and new employment opportunities tend to be insecure and
underpaid. Corporate profitability is not translating into widespread
The allocation of corporate profits to stock buybacks deserves much of
the blame. Consider the 449 companies in the S&P 500 index that were
publicly listed from 2003 through 2012. During that period those
companies used 54% of their earnings—a total of $2.4 trillion—to buy
back their own stock, almost all through purchases on the open market.
Dividends absorbed an additional 37% of their earnings. That left very
little for investments in productive capabilities or higher incomes
The buyback wave has gotten so big, in fact, that even
shareholders—the presumed beneficiaries of all this corporate
largesse—are getting worried. “It concerns us that, in the wake of the
financial crisis, many companies have shied away from investing in the
future growth of their companies,” Laurence Fink, the chairman and CEO
of BlackRock, the world’s largest asset manager, wrote in an open
letter to corporate America in March. “Too many companies have cut
capital expenditure and even increased debt to boost dividends and
increase share buybacks.”
Why are such massive resources being devoted to stock repurchases?
Corporate executives give several reasons, which I will discuss later.
But none of them has close to the explanatory power of this simple
truth: Stock-based instruments make up the majority of their pay, and
in the short term buybacks drive up stock prices. In 2012 the 500
highest-paid executives named in proxy statements of U.S. public
companies received, on average, $30.3 million each; 42% of their
compensation came from stock options and 41% from stock awards. By
increasing the demand for a company’s shares, open-market buybacks
automatically lift its stock price, even if only temporarily, and can
enable the company to hit quarterly earnings per share (EPS) targets.
As a result, the very people we rely on to make investments in the
productive capabilities that will increase our shared prosperity are
instead devoting most of their companies’ profits to uses that will
increase their own prosperity—with unsurprising results. Even when
adjusted for inflation, the compensation of top U.S. executives has
doubled or tripled since the first half of the 1990s, when it was
already widely viewed as excessive. Meanwhile, overall U.S. economic
performance has faltered.
If the U.S. is to achieve growth that distributes income equitably and
provides stable employment, government and business leaders must take
steps to bring both stock buybacks and executive pay under control.
The nation’s economic health depends on it.
From Value Creation to Value Extraction
For three decades I’ve been studying how the resource allocation
decisions of major U.S. corporations influence the relationship
between value creation and value extraction, and how
that relationship affects the U.S. economy. From the end of World War
II until the late 1970s, a retain-and-reinvest approach to
resource allocation prevailed at major U.S. corporations. They
retained earnings and reinvested them in increasing their
capabilities, first and foremost in the employees who helped make
firms more competitive. They provided workers with higher incomes and
greater job security, thus contributing to equitable, stable economic
growth—what I call “sustainable prosperity.”
This pattern began to break down in the late 1970s, giving way to a
downsize-and-distribute regime of reducing costs and then
distributing the freed-up cash to financial interests, particularly
shareholders. By favoring value extraction over value creation, this
approach has contributed to employment instability and income
As documented by the economists Thomas Piketty and Emmanuel Saez, the
richest 0.1% of U.S. households collected a record 12.3% of all U.S.
income in 2007, surpassing their 11.5% share in 1928, on the eve of
the Great Depression. In the financial crisis of 2008–2009, their
share fell sharply, but it has since rebounded, hitting 11.3% in 2012.
Since the late 1980s, the largest component of the income of the top
0.1% has been compensation, driven by stock-based pay. Meanwhile, the
growth of workers’ wages has been slow and sporadic, except during the
internet boom of 1998–2000, the only time in the past 46 years when
real wages rose by 2% or more for three years running. Since the late
1970s, average growth in real wages has increasingly lagged
productivity growth. (See the exhibit “When Productivity and Wages
When Productivity and Wages Parted Ways
From 1948 to the mid-1970s, increases in productivity and wages went
hand in hand. Then a gap opened between the two.
Not coincidentally, U.S. employment relations have undergone a
transformation in the past three decades. Mass plant closings
eliminated millions of unionized blue-collar jobs. The norm of a
white-collar worker’s spending his or her entire career with one
company disappeared. And the seismic shift toward offshoring left all
members of the U.S. labor force—even those with advanced education and
substantial work experience—vulnerable to displacement.
To some extent these structural changes could be justified initially
as necessary responses to changes in technology and competition. In
the early 1980s permanent plant closings were triggered by the inroads
superior Japanese manufacturers had made in consumer-durable and
capital-goods industries. In the early 1990s one-company careers fell
by the wayside in the IT sector because the open-systems architecture
of the microelectronics revolution devalued the skills of older
employees versed in proprietary technologies. And in the early 2000s
the offshoring of more-routine tasks, such as writing unsophisticated
software and manning customer call centers, sped up as a capable labor
force emerged in low-wage developing economies and communications
costs plunged, allowing U.S. companies to focus their domestic
employees on higher-value-added work.
These practices chipped away at the loyalty and dampened the spending
power of American workers, and often gave away key competitive
capabilities of U.S. companies. Attracted by the quick financial gains
they produced, many executives ignored the long-term effects and kept
pursuing them well past the time they could be justified.
A turning point was the wave of hostile takeovers that swept the
country in the 1980s. Corporate raiders often claimed that the
complacent leaders of the targeted companies were failing to maximize
returns to shareholders. That criticism prompted boards of directors
to try to align the interests of management and shareholders by making
stock-based pay a much bigger component of executive compensation.
Given incentives to maximize shareholder value and meet Wall Street’s
expectations for ever higher quarterly EPS, top executives turned to
massive stock repurchases, which helped them “manage” stock prices.
The result: Trillions of dollars that could have been spent on
innovation and job creation in the U.S. economy over the past three
decades have instead been used to buy back shares for what is
effectively stock-price manipulation.
Good Buybacks and Bad
Not all buybacks undermine shared prosperity. There are two major
types: tender offers and open-market repurchases. With the former, a
company contacts shareholders and offers to buy back their shares at a
stipulated price by a certain near-term date, and then shareholders
who find the price agreeable tender their shares to the company.
Tender offers can be a way for executives who have substantial
ownership stakes and care about a company’s long-term competitiveness
to take advantage of a low stock price and concentrate ownership in
their own hands. This can, among other things, free them from Wall
Street’s pressure to maximize short-term profits and allow them to
invest in the business. Henry Singleton was known for using tender
offers in this way at Teledyne in the 1970s, and Warren Buffett for
using them at GEICO in the 1980s. (GEICO became wholly owned by
Buffett’s holding company, Berkshire Hathaway, in 1996.) As Buffett
has noted, this kind of tender offer should be made when the share
price is below the intrinsic value of the productive capabilities of
the company and the company is profitable enough to repurchase the
shares without impeding its real investment plans.
But tender offers constitute only a small portion of modern buybacks.
Most are now done on the open market, and my research shows that they
often come at the expense of investment in productive capabilities
and, consequently, aren’t great for long-term shareholders.
Companies have been allowed to repurchase their shares on the open
market with virtually no regulatory limits since 1982, when the SEC
instituted Rule 10b-18 of the Securities Exchange Act. Under the rule,
a corporation’s board of directors can authorize senior executives to
repurchase up to a certain dollar amount of stock over a specified or
open-ended period of time, and the company must publicly announce the
buyback program. After that, management can buy a large number of the
company’s shares on any given business day without fear that the SEC
will charge it with stock-price manipulation—provided, among other
things, that the amount does not exceed a “safe harbor” of 25% of the
previous four weeks’ average daily trading volume. The SEC requires
companies to report total quarterly repurchases but not daily ones,
meaning that it cannot determine whether a company has breached the
25% limit without a special investigation.
Despite the escalation in buybacks over the past three decades, the
SEC has only rarely launched proceedings against a company for using
them to manipulate its stock price. And even within the 25% limit,
companies can still make huge purchases: Exxon Mobil, by far the
biggest stock repurchaser from 2003 to 2012, can buy back about $300
million worth of shares a day, and Apple up to $1.5 billion a day. In
essence, Rule 10b-18 legalized stock market manipulation through
The rule was a major departure from the agency’s original mandate,
laid out in the Securities Exchange Act in 1934. The act was a
reaction to a host of unscrupulous activities that had fueled
speculation in the Roaring ’20s, leading to the stock market crash of
1929 and the Great Depression. To prevent such shenanigans, the act
gave the SEC broad powers to issue rules and regulations.
During the Reagan years, the SEC began to roll back those rules. The
commission’s chairman from 1981 to 1987 was John Shad, a former vice
chairman of E.F. Hutton and the first Wall Street insider to lead the
commission in 50 years. He believed that the deregulation of
securities markets would channel savings into economic investments
more efficiently and that the isolated cases of fraud and manipulation
that might go undetected did not justify onerous disclosure
requirements for companies. The SEC’s adoption of Rule 10b-18
reflected that point of view.
Debunking the Justifications for Buybacks
Executives give three main justifications for open-market repurchases.
Let’s examine them one by one:
1. Buybacks are investments in our undervalued shares that signal our
confidence in the company’s future.
This makes some sense. But the reality is that over the past two
decades major U.S. companies have tended to do buybacks in bull
markets and cut back on them, often sharply, in bear markets. (See the
exhibit “Where Did the Money from Productivity Increases Go?”) They
buy high and, if they sell at all, sell low. Research by the
Academic-Industry Research Network, a nonprofit I cofounded and lead,
shows that companies that do buybacks never resell the shares at
Where Did the Money from Productivity Increases Go?
Buybacks—as well as dividends—have skyrocketed in the past 20 years.
(Note that these data are for the 251 companies that were in the S&P
500 in January 2013 and were public from 1981 through 2012. Inclusion
of firms that went public after 1981, such as Microsoft, Cisco, Amgen,
Oracle, and Dell, would make the increase in buybacks even more
marked.) Though executives say they repurchase only undervalued
stocks, buybacks increased when the stock market boomed, casting doubt
on that claim.
Source: Standard & Poor’s Compustat database; the
Academic-Industry Research Network.
Note: Mean repurchase and dividend amounts are in 2012 dollars.
Once in a while a company that bought high in a boom has been forced
to sell low in a bust to alleviate financial distress. GE, for
example, spent $3.2 billion on buybacks in the first three quarters of
2008, paying an average price of $31.84 per share. Then, in the last
quarter, as the financial crisis brought about losses at GE Capital,
the company did a $12 billion stock issue at an average share price of
$22.25, in a failed attempt to protect its triple-A credit rating.
In general, when a company buys back shares at what turn out to be
high prices, it eventually reduces the value of the stock held by
continuing shareholders. “The continuing shareholder is
penalized by repurchases above intrinsic value,” Warren Buffett wrote
in his 1999 letter to Berkshire Hathaway shareholders. “Buying dollar
bills for $1.10 is not good business for those who stick around.”
2. Buybacks are necessary to offset the dilution of earnings per share
when employees exercise stock options.
Calculations that I have done for high-tech companies with broad-based
stock option programs reveal that the volume of open-market
repurchases is generally a multiple of the volume of options that
employees exercise. In any case, there’s no logical economic rationale
for doing repurchases to offset dilution from the exercise of employee
stock options. Options are meant to motivate employees to work harder
now to produce higher future returns for the company. Therefore,
rather than using corporate cash to boost EPS immediately, executives
should be willing to wait for the incentive to work. If the company
generates higher earnings, employees can exercise their options at
higher stock prices, and the company can allocate the increased
earnings to investment in the next round of innovation.
3. Our company is mature and has run out of profitable investment
opportunities; therefore, we should return its unneeded cash to
Some people used to argue that buybacks were a more tax-efficient
means of distributing money to shareholders than dividends. But that
has not been the case since 2003, when the tax rates on long-term
capital gains and qualified dividends were made the same. Much more
important issues remain, however: What is the CEO’s main role and his
or her responsibility to shareholders?
Companies that have built up productive capabilities over long periods
typically have huge organizational and financial advantages when they
enter related markets. One of the chief functions of top executives is
to discover new opportunities for those capabilities. When they opt to
do large open-market repurchases instead, it raises the question of
whether these executives are doing their jobs.
A related issue is the notion that the CEO’s main obligation is to
shareholders. It’s based on a misconception of the shareholders’ role
in the modern corporation. The philosophical justification for giving
them all excess corporate profits is that they are best positioned to
allocate resources because they have the most interest in ensuring
that capital generates the highest returns. This proposition is
central to the “maximizing shareholder value” (MSV) arguments espoused
over the years, most notably by Michael C. Jensen. The MSV school also
posits that companies’ so-called free cash flow should be distributed
to shareholders because only they make investments without a
guaranteed return—and hence bear risk.
Why Money for Reinvestment Has Dried Up
Since the early 1980s, when restrictions on open-market buybacks were
greatly eased, distributions to shareholders have absorbed a huge
portion of net income, leaving much less for reinvestment in
Note: Data are for
the 251 companies that were in the S&P 500 Index in January 2013
and were publicly listed from 1981 through 2012. If the
companies that went public after 1981, such as Microsoft, Cisco,
Amgen, Oracle, and Dell, were included, repurchases as a
percentage of net income would be even higher.
But the MSV school ignores other participants in the economy who bear
risk by investing without a guaranteed return. Taxpayers take
on such risk through government agencies that invest in infrastructure
and knowledge creation. And workers take it on by investing in
the development of their capabilities at the firms that employ them.
As risk bearers, taxpayers, whose dollars support business
enterprises, and workers, whose efforts generate productivity
improvements, have claims on profits that are at least as strong as
The irony of MSV is that public-company shareholders typically never
invest in the value-creating capabilities of the company at all.
Rather, they invest in outstanding shares in the hope that the stock
price will rise. And a prime way in which corporate executives fuel
that hope is by doing buybacks to manipulate the market. The only
money that Apple ever raised from public shareholders was $97 million
at its IPO in 1980. Yet in recent years, hedge fund activists such as
David Einhorn and Carl Icahn—who played absolutely no role in the
company’s success over the decades—have purchased large amounts of
Apple stock and then pressured the company to announce some of the
largest buyback programs in history.
The past decade’s huge increase in repurchases, in addition to high
levels of dividends, have come at a time when U.S. industrial
companies face new competitive challenges. This raises questions about
how much of corporate cash flow is really “free” to be distributed to
shareholders. Many academics—for example, Gary P. Pisano and Willy C.
Shih of Harvard Business School, in their 2009 HBR article
American Competitiveness” and their book
Prosperity—have warned that if U.S. companies don’t
start investing much more in research and manufacturing capabilities,
they cannot expect to remain competitive in a range of advanced
Retained earnings have always been the foundation for investments in
innovation. Executives who subscribe to MSV are thus copping out of
their responsibility to invest broadly and deeply in the productive
capabilities their organizations need to continually innovate. MSV as
commonly understood is a theory of value extraction, not value
Executives Are Serving Their Own Interests
As I noted earlier, there is a simple, much more plausible explanation
for the increase in open-market repurchases: the rise of stock-based
pay. Combined with pressure from Wall Street, stock-based incentives
make senior executives extremely motivated to do buybacks on a
colossal and systemic scale.
Consider the 10 largest repurchasers, which spent a combined $859
billion on buybacks, an amount equal to 68% of their combined net
income, from 2003 through 2012. (See the exhibit “The Top 10 Stock
Repurchasers.”) During the same decade, their CEOs received, on
average, a total of $168 million each in compensation. On average, 34%
of their compensation was in the form of stock options and 24% in
stock awards. At these companies the next four highest-paid senior
executives each received, on average, $77 million in compensation
during the 10 years—27% of it in stock options and 29% in stock
awards. Yet since 2003 only three of the 10 largest repurchasers—Exxon
Mobil, IBM, and Procter & Gamble—have outperformed the S&P 500 Index.
The Top 10 Stock Repurchasers 2003–2012
At most of the leading U.S. companies below, distributions to
shareholders were well in excess of net income. These distributions
came at great cost to innovation, employment, and—in cases such as oil
refining and pharmaceuticals—customers who had to pay higher prices
Sources: Standard &
Poor’s Compustat database; Standard & Poor’s Execucomp database;
the Academic-Industry Research Network.
Note: The percentages of stock-based pay include gains realized
from exercising stock options for all years plus, for 2003–2005,
the fair value of restricted stock grants or, for 2006–2012,
gains realized on vesting of stock awards. Rounding to the
nearest billion may affect total distributions and percentages
of net income. *Steven Ballmer, Microsoft’s CEO from January
2000 to February 2014, did not receive any stock-based pay. He
does, however, own about 4% of Microsoft’s shares, valued at
more than $13 billion.
Reforming the System
Buybacks have become an unhealthy corporate obsession. Shifting
corporations back to a retain-and-reinvest regime that promotes stable
and equitable growth will take bold action. Here are three proposals:
Put an end to open-market buybacks.
In a 2003 update to Rule 10b-18, the SEC explained: “It is not
appropriate for the safe harbor to be available when the issuer has a
heightened incentive to manipulate its share price.” In practice,
though, the stock-based pay of the executives who decide to do
repurchases provides just this “heightened incentive.” To correct this
glaring problem, the SEC should rescind the safe harbor.
A good first step toward that goal would be an extensive SEC study of
the possible damage that open-market repurchases have done to capital
formation, industrial corporations, and the U.S. economy over the past
three decades. For example, during that period the amount of stock
taken out of the market has exceeded the amount issued in almost every
year; from 2004 through 2013 this net withdrawal averaged $316 billion
a year. In aggregate, the stock market is not functioning as a source
of funds for corporate investment. As I’ve already noted, retained
earnings have always provided the base for such investment. I believe
that the practice of tying executive compensation to stock price is
undermining the formation of physical and human capital.
Rein in stock-based pay.
Many studies have shown that large companies tend to use the same set
of consultants to benchmark executive compensation, and that each
consultant recommends that the client pay its CEO well above average.
As a result, compensation inevitably ratchets up over time. The
studies also show that even declines in stock price increase executive
pay: When a company’s stock price falls, the board stuffs even more
options and stock awards into top executives’ packages, claiming that
it must ensure that they won’t jump ship and will do whatever is
necessary to get the stock price back up.
In 1991 the SEC began allowing top executives to keep the gains from
immediately selling stock acquired from options. Previously, they had
to hold the stock for six months or give up any “short-swing” gains.
That decision has only served to reinforce top executives’ overriding
personal interest in boosting stock prices. And because corporations
aren’t required to disclose daily buyback activity, it gives
executives the opportunity to trade, undetected, on inside information
about when buybacks are being done. At the very least, the SEC should
stop allowing executives to sell stock immediately after options are
exercised. Such a rule could help launch a much-needed discussion of
meaningful reform that goes beyond the 2010 Dodd-Frank Act’s “Say on
Pay”—an ineffectual law that gives shareholders the right to make
nonbinding recommendations to the board on compensation issues.
But overall the use of stock-based pay should be severely limited.
Incentive compensation should be subject to performance criteria that
reflect investment in innovative capabilities, not stock performance.
Transform the boards that determine executive compensation.
Boards are currently dominated by other CEOs, who have a strong bias
toward ratifying higher pay packages for their peers. When approving
enormous distributions to shareholders and stock-based pay for top
executives, these directors believe they’re acting in the interests of
That’s a big part of the problem. The vast majority of shareholders
are simply investors in outstanding shares who can easily sell their
stock when they want to lock in gains or minimize losses. As I argued
earlier, the people who truly invest in the productive capabilities of
corporations are taxpayers and workers. Taxpayers have an interest in
whether a corporation that uses government investments can generate
profits that allow it to pay taxes, which constitute the taxpayers’
returns on those investments. Workers have an interest in whether the
company will be able to generate profits with which it can provide pay
increases and stable career opportunities.
It’s time for the U.S. corporate governance system to enter the 21st
century: Taxpayers and workers should have seats on boards. Their
representatives would have the insights and incentives to ensure that
executives allocate resources to investments in capabilities most
likely to generate innovations and value.
Courage in Washington
After the Harvard Law School dean Erwin Griswold published “Are Stock
Options Getting out of Hand?” in this magazine in 1960, Senator Albert
Gore launched a campaign that persuaded Congress to whittle away
special tax advantages for executive stock options. After the Tax
Reform Act of 1976, the compensation expert Graef Crystal declared
that stock options that qualified for the capital-gains tax rate,
“once the most popular of all executive compensation devices…have been
given the last rites by Congress.” It also happens that during the
1970s the share of all U.S. income that the top 0.1% of households got
was at its lowest point in the past century.
The members of the U.S. Congress should show the courage and
independence of their predecessors and go beyond “Say on Pay” to do
something about excessive executive compensation. In addition,
Congress should fix a broken tax regime that frequently rewards value
extractors as if they were value creators and ignores the critical
role of government investment in the infrastructure and knowledge that
are so crucial to the competitiveness of U.S. business.
Instead, what we have now are corporations that lobby—often
successfully—for federal subsidies for research, development, and
exploration, while devoting far greater resources to stock buybacks.
Here are three examples of such hypocrisy:
Exxon Mobil, while receiving about $600 million a year in U.S.
government subsidies for oil exploration (according to the Center for
American Progress), spends about $21 billion a year on buybacks. It
spends virtually no money on alternative energy research.
Meanwhile, through the American Energy Innovation Council, top
executives of Microsoft, GE, and other companies have lobbied the U.S.
government to triple its investment in alternative energy research and
subsidies, to $16 billion a year. Yet these companies had plenty of
funds they could have invested in alternative energy on their own.
Over the past decade Microsoft and GE, combined, have spent about that
amount annually on buybacks.
Intel executives have long lobbied the U.S. government to increase
spending on nanotechnology research. In 2005, Intel’s then-CEO, Craig
R. Barrett, argued that “it will take a massive, coordinated U.S.
research effort involving academia, industry, and state and federal
governments to ensure that America continues to be the world leader in
information technology.” Yet from 2001, when the U.S. government
launched the National Nanotechnology Initiative (NNI), through 2013
Intel’s expenditures on buybacks were almost four times the total NNI
In response to complaints that U.S. drug prices are at least twice
those in any other country, Pfizer and other U.S. pharmaceutical
companies have argued that the profits from these high prices—enabled
by a generous intellectual-property regime and lax price
regulation—permit more R&D to be done in the United States than
elsewhere. Yet from 2003 through 2012, Pfizer funneled an amount equal
to 71% of its profits into buybacks, and an amount equal to 75% of its
profits into dividends. In other words, it spent more on buybacks and
dividends than it earned and tapped its capital reserves to help fund
them. The reality is, Americans pay high drug prices so that major
pharmaceutical companies can boost their stock prices and pad
executive pay.Given the importance of the stock market and
corporations to the economy and society, U.S. regulators must step in
to check the behavior of those who are unable or unwilling to control
themselves. “The mission of the U.S. Securities and Exchange
Commission,” the SEC’s website explains, “is to protect investors,
maintain fair, orderly, and efficient markets, and facilitate capital
formation.” Yet, as we have seen, in its rulings on and monitoring of
stock buybacks and executive pay over three decades, the SEC has taken
a course of action contrary to those objectives. It has enabled the
wealthiest 0.1% of society, including top executives, to capture the
lion’s share of the gains of U.S. productivity growth while the vast
majority of Americans have been left behind. Rule 10b-18, in
particular, has facilitated a rigged stock market that, by permitting
the massive distribution of corporate cash to shareholders, has
undermined capital formation, including human capital formation.
The corporate resource allocation process is America’s source of
economic security or insecurity, as the case may be. If Americans want
an economy in which corporate profits result in shared prosperity, the
buyback and executive compensation binges will have to end. As with
any addiction, there will be withdrawal pains. But the best executives
may actually get satisfaction out of being paid a reasonable salary
for allocating resources in ways that sustain the enterprise, provide
higher standards of living to the workers who make it succeed, and
generate tax revenues for the governments that provide it with crucial
A version of this article appeared in the
issue of Harvard Business Review.
Copyright © 2016 Harvard
Business School Publishing