Why stock-based compensation poisons leadership

ISSN： 1087-8572

Source： Strategy and Leadership, Vol.41, Iss.1, 2012-12, pp. : 15-17

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Abstract

Purpose - This paper aims to present an interview carried out by Stephen Denning, who asks Roger L. Martin, the author of the recent explosive book Fixing the Game and Dean of Rotman School of Management at the University of Toronto, to explain why the private sector's 35-year addiction to "maximizing shareholder value" has been disastrous for shareholders, for employees, the personal lives of executives, for the economy and for society at large. Design/methodology/approach - In the interview Martin outlines the forces at work that preserve a dysfunctional system of maximizing the return for shareholders instead of focusing on customer value. Findings - The paper reveals that there are many special interests that are devoted to maintaining the shareholder value doctrine, even at the risk of the survival of the firm. Practical implications - Executives who mouth the shareholder value mantra need to realize that they are playing a game they cannot win on behalf of faceless, nameless shareholders who behave unilaterally and capriciously. Originality/value - The paper reveals Martin's advice for private-sector leaders who want to get back to doing real business, which is: focus on activities that provide value to customers and stop playing with earnings to hit Wall Street's consensus number.