Thanks for your interesting comments and for your book recommendation. I will certainly check it out since I am working on a book on the genealogy, structure and distinct feature of the contemporary ruling elites.
As it happens , I agree with you totally. I did not mean to give the impression that the focus on share holder value was something to be celebrated. It led to a short-termist corporate practice which allowed the managerial class considerable scope to wrest control over the direction of the firms. So as you suggest the rot set in a long time before the formalisation of the concept of shareholder value. And I really like it when you suggest that hypocrisy triumphed under both the regime of shareholder and stakeholder capital- although stakeholder capital is just a little bit more creepy.
After reading Roger Martin's_Fixing the Game_ https://rogerlmartin.com/lets-read/fixing-the-game review here: https://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/ I have come to the conclusion that you have the chronology slightly wrong. The push to 'maximise shareholder value' was not the reflection of the old caplitalist ethic, but instead the weapon that killed it. The old capitalist values were grounded in an ideal of 'make the customer delighted'. In 1976 finance professors Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester published a paper in the Journal of Financial Economics entitled “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” It is the most cited, most influential business paper of all time. It identified a real problem -- the management of companies often manipulated things so the companies served them, instead of the shareholders. An example is when sales figures were calculated in an inflated way so that the Christmas bonus, based on sales, could be larger.
The idea they had was to give executive compensation in shares. This would align the interests of the executive with the shareholder-owners, because the executive would _be_ shareholder owners. It is logical, but unfortunately it seems to have been the greatest instance of an intervention which accomplished the exact opposite of what was intended. If you thought that the executive was playing fast and loose with the Christmas bonus calculations, you hadn't seen anything like what they could do when they could do when managing the expectations of the stock prices in the financial market.
It hasn't improved things for the shareholders, who have found that the executive has even less interest in the long term viability of the firm than was the norm in the 60s and 70s. It means that for more than a generation now we have had, in the west, not one capitalist class but two. Martin calls the economies 'the economy of the real' and 'the economy of expectations'. The new class, which is internationalist and global, and which does not believe in 'local interests' and even in 'national interests' is hell-bent on destroying the old one. Since the old class already had a party in the United States (the Republicans) the new one set about taking over the Democratic party.
This left the US without a 'A Plague on both your Houses' Party, which they so badly needed. The split in the two capitalist classes pits the party that was condemned for exploiting the workers against the party that doesn't want to have any altogether. The party of 'good works at home done by your local chamber of commerce' -- often through the Kiwanis, Knights of Columbus, and Rotary Clubs -- are up against Ethical Altruists who prefer their good works to be done very far away from any place that might vote them in or out of power.
The old ideal said that a good person would help the unfortunate because it was a duty to do so, whether or not you felt like doing it. The new ideal says that you have to appear caring, because it is this appearance that matters, not the actual doing. Hypocrisy flourished under both ideals, as it always does, but an executive class whose business is the managing of expectations about one's stock price is clearly well ahead in a world where what matters is the managing of expectations about how caring your business is.
At any rate, I think readers here who are interested in such things will find that the book gives you much food for thought. And it has straight-forward recommendations for changing the incentive structures so that businesses can return to being customer-centric, so this is not a 'feel smug while watching helplessly as the world burns' sort of book, at all. I have my doubts about some of the proposed changes, but I would dearly like it if they became part of the inernational political discourse.
Dear Laura
Thanks for your interesting comments and for your book recommendation. I will certainly check it out since I am working on a book on the genealogy, structure and distinct feature of the contemporary ruling elites.
As it happens , I agree with you totally. I did not mean to give the impression that the focus on share holder value was something to be celebrated. It led to a short-termist corporate practice which allowed the managerial class considerable scope to wrest control over the direction of the firms. So as you suggest the rot set in a long time before the formalisation of the concept of shareholder value. And I really like it when you suggest that hypocrisy triumphed under both the regime of shareholder and stakeholder capital- although stakeholder capital is just a little bit more creepy.
Frank
After reading Roger Martin's_Fixing the Game_ https://rogerlmartin.com/lets-read/fixing-the-game review here: https://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/ I have come to the conclusion that you have the chronology slightly wrong. The push to 'maximise shareholder value' was not the reflection of the old caplitalist ethic, but instead the weapon that killed it. The old capitalist values were grounded in an ideal of 'make the customer delighted'. In 1976 finance professors Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester published a paper in the Journal of Financial Economics entitled “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” It is the most cited, most influential business paper of all time. It identified a real problem -- the management of companies often manipulated things so the companies served them, instead of the shareholders. An example is when sales figures were calculated in an inflated way so that the Christmas bonus, based on sales, could be larger.
The idea they had was to give executive compensation in shares. This would align the interests of the executive with the shareholder-owners, because the executive would _be_ shareholder owners. It is logical, but unfortunately it seems to have been the greatest instance of an intervention which accomplished the exact opposite of what was intended. If you thought that the executive was playing fast and loose with the Christmas bonus calculations, you hadn't seen anything like what they could do when they could do when managing the expectations of the stock prices in the financial market.
It hasn't improved things for the shareholders, who have found that the executive has even less interest in the long term viability of the firm than was the norm in the 60s and 70s. It means that for more than a generation now we have had, in the west, not one capitalist class but two. Martin calls the economies 'the economy of the real' and 'the economy of expectations'. The new class, which is internationalist and global, and which does not believe in 'local interests' and even in 'national interests' is hell-bent on destroying the old one. Since the old class already had a party in the United States (the Republicans) the new one set about taking over the Democratic party.
This left the US without a 'A Plague on both your Houses' Party, which they so badly needed. The split in the two capitalist classes pits the party that was condemned for exploiting the workers against the party that doesn't want to have any altogether. The party of 'good works at home done by your local chamber of commerce' -- often through the Kiwanis, Knights of Columbus, and Rotary Clubs -- are up against Ethical Altruists who prefer their good works to be done very far away from any place that might vote them in or out of power.
The old ideal said that a good person would help the unfortunate because it was a duty to do so, whether or not you felt like doing it. The new ideal says that you have to appear caring, because it is this appearance that matters, not the actual doing. Hypocrisy flourished under both ideals, as it always does, but an executive class whose business is the managing of expectations about one's stock price is clearly well ahead in a world where what matters is the managing of expectations about how caring your business is.
At any rate, I think readers here who are interested in such things will find that the book gives you much food for thought. And it has straight-forward recommendations for changing the incentive structures so that businesses can return to being customer-centric, so this is not a 'feel smug while watching helplessly as the world burns' sort of book, at all. I have my doubts about some of the proposed changes, but I would dearly like it if they became part of the inernational political discourse.