Professor George Serafeim (left) and Professor Rebecca Henderson (right); image by John Ritter

CEOs are increasingly being asked to take the lead on some of the most vexing problems of our time, from climate change and data privacy to issues of income or gender inequality. Since developing the second-year MBA course Reimagining Capitalism in 2012, Rebecca Henderson, the John and Natty McArthur University Professor, has been helping students explore the roles that the corporation and its leaders can play in addressing these existential crises. Demand for the course has grown from 28 students in its first year to 300 last year, taught in four sections by Henderson and George Serafeim, the Charles M. Williams Professor of Business Administration. Here, they talk about the shifting shape of leadership.

How has the course evolved over its lifetime?

Rebecca Henderson: The first year I did it in my spare time, and we were trying to find our way. Right from the beginning, the question was: What is the role of business in the broader systemic conversation? My own work has always been focused on climate change, and if I have to choose, that’s the problem I thought was the most important to tackle. But the students said, “Whoa, how can we talk about the big problems of our time without thinking about inequality?”

The students also pushed me to move beyond shared value. Of course, building the business models that create both public and private value simultaneously is very important, but Mark Kramer and Michael Porter had a whole course focused on the issue, and the students said, “Would it really make a difference?” The problems we face are so big that even if every corporation in the world cleaned up its own act and paid its own employees better, that’s still not enough. It’s through teaching the course that I’ve come to believe that corporations have to think beyond their own boundaries to a broader concern with the health of the institutions on which we all rely.

In the second year I taught the course with Clayton Rose, who had worked as an investment banker, so he had a very different perspective. Then George joined us the third year. I have to say that I had never realized how important accounting was to the future of civilization until I started working with George. We can talk about saving the planet, but if you can’t measure it and if the financial sector can’t see that it helps them make money, and if none of us can see that we’re having a real impact, then we have to go back to the beginning.

George Serafeim: Let me begin by saying that I started teaching the course as an assistant professor, and every young professor wants to grow up to be Rebecca Henderson.

RH: It must be the British accent.

GS: Really, I learn from our collaboration every day. And the way that I got interested in this whole space is obviously by looking at the world and understanding that, one, we’re just completely destroying the environment, slowly but steadily. And two, the system generates such unequal access to opportunities for people, which leads to dysfunctions in the system and lack of meritocracy. I asked myself why this is happening and looked into the idea that we’re terrible at measuring the things that really matter: the state of well-being, our environment, and society. Imagine living a life where you have no idea what your speed is when you’re driving: This is like the society that we have built. The outcomes that we’re getting aren’t very surprising since we’re not actually paying attention to those things. So I became interested in how we can measure the environmental and societal impacts of companies, how we can analyze them, and then how do we standardize them to create a race to innovation instead of a race to the bottom. Because then you can actually start mobilizing markets.

How do you see the imperative changing with time?

GS: Our MBA students have a 35- or 40-year career in front of them, and we have a duty to prepare them for the competitive landscape in their careers. My hypothesis is that it is going to be a very different world, where natural capital and social capital are going to be priced and managers are going to be accountable for their impact. The old way of thinking suggested that you could ignore all those issues and be very competitive at least in the short term. But perhaps we will be living in a world where, to be successful as leaders, our students will need to be proactive rather than reactive in how they manage companies’ impact on society. And as a result, if the hypothesis of the course is correct, then actually we need to prepare our future leaders to be successful in that environment.

RH: Ever since I started teaching this material, the people running the Executive Education programs have invited me in on an occasional guest-lecturer basis. When they first invited me five or six years ago, it was clear that I was the broccoli: Now here’s Rebecca, she’s going to talk about climate change and make you feel uncomfortable. In the past, I’ve always had reasonably good teaching ratings in these kinds of programs, but when I first started talking about the need to reimagine capitalism I got trashed.

Last year, I was teaching a group of deeply experienced CEOs and presidents, and they were asking me really tough questions. I was quite sure I’d never be asked back. But a week later the faculty member running the session said to me, “Rebecca, we have to have you back next year. They thought reimagining capitalism was the most interesting idea they had heard in a while.” And I can tell you it wasn’t me—I am unchanged.

GS: There is no doubt that the level of interest has skyrocketed. I have also presented consecutively at the same big investment conference and found the same thing. The first year, I think 40 people showed up for my session on ESG issues in investing, the next year 230. This year there were 600 for the same event. Again, I don’t think I’ve changed at all.

RH: Even people who still think this is irrelevant are beginning to see they should at least know what’s going on. Which doesn’t mean that we’ve got this fixed.

GS: No, there’s a long way to go for that.

RH: Change is hard. It requires letting go of a lot of what made you successful and being willing to think about the fact that the world may be quite different today. And that’s a difficult thought. Historically, the people who’ve been willing to embrace it quickly have done much better. But I think we have a secret weapon: The firms that change are those that not only align the head and the heart, but also persuade people that the change is going to improve their lives and make a difference in the lives of the people they love. We use the terms “purpose,” “meaning,” and “values.” That’s what drives change. And in this case, we have that lever. We really do.

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