Fascinating, bracing article by Steve Denning in Forbes based on Roger L. Martin’s new book, Fixing the Game:
Martin says that the trouble began in 1976 when finance professor
Michael Jensen and Dean William Meckling of the Simon School of
Business at the University of Rochester published a seemingly
innocuous paper in the Journal of Financial Economics entitled
“Theory of the Firm: Managerial Behavior, Agency Costs and
Ownership Structure.” […]
The principal-agent problem occurs, the article argued, because
agents have an inherent incentive to optimize activities and
resources for themselves rather than for their principals.
Ignoring Peter Drucker’s foundational insight of 1973 that the
only valid purpose of a firm is to create a customer, Jensen
and Meckling argued that the singular goal of a company should be
to maximize the return to shareholders.
Eye-opening, common-sense argument.