64 SUMMER 2018 STANFORD BUSINESS
With the Corporations
and Society Initiative,
Anat Admati hopes
to make Stanford GSB
a better citizen of
Anat Admati often shares a particular New Yorker cartoon when she talks to people about the Corporations and Society Initiative that she recently launched at Stanford Graduate School of Business. In the cartoon, a man and three children are sitting around a campfire. The man’s business suit is tattered, and in the distance behind them a smoking city lies in rubble. “Yes, the planet got destroyed,” the man says to the kids, “but for a beautiful moment in time we created a lot of value for shareholders.” “That cartoon just about covers it,” says Admati, the George G.C. Parker Professor of Finance and Economics. She has spent much of the past two years trying to persuade faculty and students at Stanford GSB to examine how their work affects not just the business world but also society at large. “By teaching what we teach and through our research and other
activities, we may tolerate or enable, maybe even subtly encourage,
harmful actions,” Admati says. “We may do it inadvertently or not
be aware of it, but that’s what we’re sometimes doing.”
The initiative grew out of a pilot visitors program that over
the last two years has brought more than a dozen scholars,
policymakers, and authors to Stanford for up to t wo weeks. The
visitors engage with students and faculty at the business school and
beyond in the hope of breaking silos and engaging in a discussion of
broader issues that cut across disciplines.
Admati hopes to work with students, faculty, and staff to
evolve and expand the set of activities. She also hopes to engage
with alumni and has already met multiple times with Stanford
GSB alumni in the Washington, D.C., area — a group that she
describes as “very, very engaged” — to discuss the challenge of
ensuring that leaders in the private and public sector take actions
that work better for society.
“These topics are top-of-mind for a lot of us here in Washington,”
says Amita Shukla, MBA ’03, president of the Stanford GSB Alumni
Washington, D.C./Baltimore Chapter. “And there’s no doubt they’re
much more a part of conversation today than they were before the
last presidential election.”
Amit Seru, the Steven and Roberta Denning Professor of
Finance at Stanford GSB, hopes that the initiative helps encourage
and support more research as well as engagement on how better
governance and sensible policy can enable corporations to serve
society. “There is a vast set of complex issues in this area that we
do not yet understand and that we should explore more deeply if
we want to remain a leader and have the best impact we can have
on the world,” Seru says.
In a recent interview, Admati shared some of her thoughts
about the Corporations and Society Initiative — where it’s been
and where it’s going.
You spent many years studying the details of financial markets
and contracts, portfolio management, asset pricing, and the like.
Was there a moment of epiphany for you when you decided you
needed to move beyond those topics? During the financial crisis,
I started looking into banking, and that’s when I saw a disconnect.
Because financial firms can do all the things that we tell them to do
to maximize shareholder value and yet still mess up everything.
Mess everything up in what way? Make reckless mortgage loans,
bundle and sell them around the world, and create a fragile system
that takes down the global economy when homeowners start
defaulting, for one thing. How can that be? How is that tolerated?
It turns out the rules were bad, and our assumptions about