Strategy Forum / Panelist

Richard Holden

UNSW Business School

University of New South Wales


Professor Holden’s research focuses on contract theory, organizational economics, law and economics, and political economy. He has written on topics including network capital, political districting, the boundary of the firm, incentives in organizations, mechanism design, and voting rules. He is currently editor of the Journal of Law and Economics and is the founding director of the Herbert Smith Freehills Initiative on Law & Economics at UNSW.

Voting History

Statement Response
Corporate investments in diversity, equity, and inclusion should be expected to generate a monetary return on investment. Disagree “If something is already in the financial interests of a corporation, it should (at least eventually) happen. Some — perhaps many — forms of DEI fall into this category. The harder case is where there is a genuine trade-off between DEI and financial returns. In this case, a true commitment to DEI means being willing to sacrifice something financially.”
The era of dominance for Tesla in the EV market is coming to an end. Disagree “Tesla is in almost every way the Apple of the motor vehicle industry. And while Apple’s initial dominance in the smartphone (and then tablet) market receded to some degree — say, in terms of market share — its dominance continued. Apple continues to define the frontier of these and adjacent products. I expect Tesla to do the same thing in the motor vehicle industry. Tesla cars do literately everything better than all other cars. And it strikes me as unlikely that another company will develop the organizational capability to match that.”
Online education and specialized degrees will supplant the traditional two-year full-time MBA.  Strongly disagree “A meaningful part of the value of an MBA is the networking opportunities that, for people who don’t know each other‚ can only happen in person. The top programs, knowing this, are unlikely to cannibalize their own programs, and a unilateral deviation simply results in a loss of market share.”
Starbucks’s plans to increase wages for nonunionized workers is a shortsighted strategy. Disagree “There is a clear benefit to Starbucks from trying to make unionizing relatively less attractive. That also has risks, but it’s hard to say if those risks obviously outweigh the direct benefits.”
Sanctions against Russia will cause multinational companies to consider human rights protections in supply chains more broadly. Agree “The new information for companies stemming from Russia’s invasion of Ukraine is that customers are now able to coordinate very quickly on an equilibrium where basically all companies have to respond to serious human rights concerns. What is less clear (to me at least) is how high the bar is for those concerns to lead to a “sanction equilibrium.” Unprovoked invasion of a sovereign country followed by war crimes is a clear case. What about “internal” human rights violations? Those have persisted for years in many countries and may well continue to be unchecked by consumer and market sentiment.”
Blockchain is more likely to be a sustaining innovation than a disruptive innovation in the financial sector. Agree “Smart contracts are especially applicable in the financial sector, and I see smart contracts of various kinds as the key innovation enabled by blockchain.”
The field of strategic management has overlooked the role of corporate purpose in driving business performance. Neither agree nor disagree “It seems reasonable to me that if there is strong agreement among managers and boards of directors about their objective function, that scholars of strategic management largely take that objective function as given. Since there is now more discussion about shareholder value (the Friedman paradigm), shareholder welfare (the Hart-Zingales paradigm), and stakeholder value (the Elizabeth Warren view), it is natural that the field of strategic management will explore the implications of different objective functions for organizations and business strategy.”
Socially responsible mutual funds are more of a marketing tool than a solution to environmental and social problems. Agree “If an impact fund said, “Hey, our returns are 150-200 basis points lower than they could be, but we factor in environmental and social problems,” then I think they would have a valid role. That is acknowledging the difference between shareholder value and shareholder welfare. Shareholders care about things other than money, and they can’t just take their high returns and purchase social impact. This is a point made forcefully by Hart and Zingales. But ESG funds almost never do that. They say “we do social good and make great returns.” This failure to acknowledge the trade-off should make one deeply suspicious.”
When hackers take data hostage, companies should pay the ransom. Disagree “This strikes me as a coordination problem. If nobody pays the ransom, then hackers are unlikely to take data hostage. But individually, it is completely rational to pay the ransom. So we need some kind of coordination device to make it credible that companies won’t pay.”
Relaxing the rules around physical presence in the office will improve employee productivity and firm performance. Strongly agree “Physical presence in the workplace has aspects of a coordination game with multiple equilibria. The pandemic combined with improved technological solutions has helped us shift to a new equilibrium. In it, travel time is reduced, and the ability to balance work and caring responsibilities is increased. The Holmström-Milgrom multitasking issues about limits on outside activities are an important caveat to this. But clever employment contract design matched with tech solutions should partially address such concerns.”
The COVID-19 pandemic has permanently changed how companies should think about business strategy. Disagree “Business strategy always took account of, among other things, the need to balance “just in time” considerations with “just in case” considerations. Supply chain and inventory management may change after the pandemic. But the strategic considerations are the same. The optimal weight accorded to different factors has arguably changed, though.”
The COVID-19 pandemic will lead companies to relocate infrastructure and employees away from dense urban locations. Disagree “The positive effect of access to high-human-capital workers is likely to dominate the benefits of being in a less dense location in the event of a pandemic. Firms may well respond to the current crisis by pushing governments toward better response planning and prevention.”
The California Consumer Privacy Act will undermine the targeted advertising market by giving consumers the right to opt out of allowing companies to sell personal data to third parties. Agree
In the wake of recent climate-related disasters and related events, such as the bankruptcy of PG&E, corporations are now planning for the increased operational risks and potential liabilities caused by climate change. Agree “It is clear that there has been a marked upward shift in concern about corporate liability for climate-related events due to, e.g., shareholder class-action lawsuits. What exactly caused that shift is less clear to me, but it will be an important part of law and corporate governance going forward.”
Antitrust policy should intervene more decisively to limit the scope of large technology platforms. Strongly disagree “Platforms operate in markets with network externalities. A significant benefit to consumers comes from such platforms having large market share. Moreover, most current platforms have very limited pricing power, so consumers do not seem harmed by market share per se. I would focus more on data ownership and privacy concerns.”
U.S. regulations have been rolled back in a number of areas, including emissions standards and clean water. Companies will decide to voluntarily adhere to rules that closely resemble the original standards. Strongly disagree “Voluntary compliance puts firms at a competitive disadvantage, absent some coordination device like an industry standard. State law can also play a crucial role, as California has shown.”
The Business Roundtable’s new Statement on the Purpose of a Corporation indicates a shift away from shareholder value maximization as the sole purpose of the corporation and toward a broader view of value creation.
This shift will have material impact on the well-being of U.S. workers.
“First, it's completely unclear that this is a genuine sentiment. Second, there have always been instrumental reasons — even under the Friedman view — for corporations to care about workers and other stakeholders. Happy workers are more productive, which leads to more profits. Companies that are seen to be socially responsible attract more customers, all else equal, and so on.”
In the next decade, we will see the first sustainably profitable private commercial activities in space. Disagree “Profitability seems pretty far away given the current state of development of the industry. And given the first-mover advantages, I suspect loss-making will be tolerated for a substantial period of time.”
Introducing 5G networks 3-5 years ahead of other countries will give Chinese firms an advantage. Agree “I think it depends on how strong the network externalities are and the degree to which 5G technology once installed can be replaced with superior technology.”
The increase in stock market volatility that began in 2018 will last for another three to five years. Neither agree nor disagree “There are good reasons — perhaps most notably U.S.-China tensions — for a lot of investor fear at the moment. For that to continue uninterrupted for several more years would be sufficiently damaging that it would involve a serious failure of the political process. Yet, it is hard to argue that political processes are working well globally.”