Loyalty – to country and corporation – and what it means

In a post a couple of weeks back, I wrote obliquely about the governance paradox of loyalty. Let’s now think about it more directly.

I worked for a long time for a company whose products, services and ethos I greatly admired. The company gave me opportunities to travel to many parts of the world, more than 30 countries I once calculated, some on multiple occasions. I lived in four of them, and in three the company paid for my housing, furniture and car. It took care of the hassles about being an expatriate and then leaving one country to move to another. And I got paid pretty well, too, though I might have made more had I changed jobs. And over my career, I certainly would have earned more in total if I had: The company was – unsurprisingly – less loyal to me than I was to it.

Even now, more than a quarter of a century after leaving, I – like many of my old colleagues – still feel a sense of allegiance to the company, its products and services, and especially to the ethos that we all lived and breathed.

During those years and since, the company was more important to me than country. That’s loyalty.

Come to think of it, I have a sense of belonging to the other places I’ve worked too, though perhaps with less intensity: Unlike that one company, those employers weren’t

• my social system,

• provider of health care, or

• source of education – through in-house training, funding for advanced study, and the promise of private school fees for the kids (which we didn’t use).

But none of those was the real source of loyalty.

Instead, the company – its senior management, board of directors, and a lot of the employees in a lot of the departments – shared the same intent.

A colleague of mine put it this way: Our purpose was to “shed light on dark places”. We were purveyors of honesty and fairness. We calculated utility, to be sure. Profit and loss mattered. We had principles, some seemingly a priori, others approaching categorical imperatives, but none without due regard to the possibility of error. Our focus on illuminating the dark places in the world – in politics, markets, business behaviour and more – was virtuous. But deep down, we were pragmatists, recognising that the truths we sought to convey – the lights for those dark places – were mutable and debatable needed to be correctable. Any truths we claimed to have found, so tentatively, were just assertions, but ones that warranted attention (Dewey, 1941), and not those of hot air, blather, or sophistry.

In short, I pledged and still pledge allegiance not to the flag – the brand – but to the republic of ideas for which it stood and perhaps still stands, nearly thirty years later, including its acceptance of its fallibility.

Shareholders in the company might well share that sense, that source of loyalty, but not all of them. That’s why corporate governance for shareholders first is often viewed through only two of the three lenses that Albert Hirschman (1970) articulated in his theory of power in politics. Shareholders can exercise “voice” by voting at the annual meeting, lobbying with management and boards for changes in strategy, and engaging in public campaigns of activism. They can take the “exit” by selling their shares. If they sell enough of them, and if managers are paid in stock options or shares themselves, then taking the “exit” can become an exercise of “voice” by the back door (Admati & Pfleiderer, 2009).

But in stock markets, the exit is open and the processes of coming to buy, sell, or hold shares emphasise rationality over emotion – the cognitive over the affective. The impediments to building loyalty are high. No wonder academic and commercial discussions of corporate governance pay so little attention to it.

Which is why employees are often more loyal than shareholders, and loyalty to companies is harder to achieve and maintain than loyalty to one’s country. That may be why it’s so difficult for companies to focus on the longer term.

Perhaps it’s why states and the politicians who run them should seek a less transactional approach to citizens – provided that they accept their fallibility and only make assertions backed by evidence, logic, and theories – the warrants – that can justify them.

Happy election year! And may you career be merry and bright!

Admati, A. R., & Pfleiderer, P. C. (2009). The 'Wall Street Walk' and Shareholder Activism: Exit as a Form of Voice. Review of Financial Studies, 22(7), 2645-2685. doi:10.1093/rfs/hhp037

Dewey, J. (1941). Propositions, Warranted Assertibility, and Truth. The Journal of Philosophy, 38(7), 169-186. doi:10.2307/2017978

Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Cambridge, MA: Harvard University Press.