Leadership / Performance: Are You Committed To Something Bigger Than Yourself?

Is There Anything Bigger Than The Maximisation Of Shareholder Value?

According to Roger Martin, the third most influential business thinker in the world according to Thinkers50, the shareholder value maximisation revolution was triggered in 1976 by Michael Jensen and William Meckling.  How? These economists published, what has turned out as the most cited article ever:  “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”.

In this article, Jensen and Meckling argued that the professional managers (running businesses) were looking after their interests at the expense of the shareholders.  Thus began the  shareholder maximisation movement that has since then taken over the business world. And in so doing, all other stakeholders (customers, employees, suppliers, partners, society at large ..) have been viewed-treated as mere resources and/or means of creating-maximising shareholder value.

Are You Committed To Something Bigger Than Yourself? 

What does Michael Jensen say on the matter today?  Let’s listen:

“I have a bad rep on this kind of thing. Because people think that all I want companies to do is to maximise the value of the stock. First of all that is false, it’s not what I ever said. But I guarantee you if you are talking about maximising the right value, which is the total value of the firm, if that is all you’re doing you won’t maximise value! 

You’ve got to be committed, the company has to be, the firm has to be, committed to something bigger than itself. That will light people up. And cause them to be attracted to your organisation. Passionate about it! They’ll find something in what you’re committed to, the company is committed to, that satisfies them, lights them up and excites them. And that’s a HUGE missing component of what’s going on out there in the world ….”

- Michael C. Jensen talking on leadership at the Simon School (talk published on Mar 17, 2014)

If you are interested in listening to Michael Jensen and Werner Erhard share their ontological-phenomenological model of leadership at the Simon School then here is the associated YouTube video:

Posted on March 19, 2014, in Culture, Leadership / Change / Transformation, Organisational Design and tagged , , , , , , . Bookmark the permalink. 2 Comments.

  1. Thanks for the link Maz, fascinating

    Like

  2. Adrian Swinscoe

    Maz, Thank you for the link and the video. Great stuff.

    Adam Smith is another example whose work has, in many parts, been misinterpreted, particularly if we take into his Theory of Moral Sentiments which lays the foundations for and predates The Wealth of Nations.

    Adrian

    Like

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