Global role for growing companies

The wealth gap between countries and companies continues to rise, though neither side has accepted the fact. Global companies are growing at a far greater rate than countries and will need to take greater responsibility for some of the world's most worrying problems, from the environment to security.

by Harvard Business Review, February 2006
Last Updated: 23 Jul 2013

Research points to an earnings disparity between states and corporations. While the Standard & Poor's 500 grew by 22% in 2004 and their revenue growth exceeded 10%, global GDP growth in 2005 was only 3.2% (with the highest being 9.5%).

When looking at individual global companies, the difference was even greater. For instance, 101 S&P companies registered 42% growth in earnings in 2004. Further, companies are likely to become more independent of their home countries as the process of offshoring continues to diminish their loyalty.

States have not yet accepted the facts of life, as evidenced by the EU's attempt to ban bra imports from China and central banks misleadingly acting as if they control interest rates that are more likely to be affected by global capital flows.

The outcome of this failure to see the true state of affairs is that nations borrow and spend too much and that heads of global businesses fail to shoulder the new burden of responsibility that has befallen them.

Source: Wake up and smell the performance gap (strategy)
Zachary Karabell, chief economist and portfolio manager at Fred Alger Management, New York
Harvard Business Review, February 2006

Review by Morice Mendoza

Harvard Business Review, February 2006 recommends

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