The Shareholder Value Myth, Author: Lynn Stout.
Pay Without Performance, Authors: Lucian Bebchuk and Jesse Fried.
In Search of Excess: The Overcompensation of American Executives, Author: Graef Crystal.
The Price of Inequality, Author: Joseph Stiglitz.
Strategic Management, Author: R. Edward Freeman.
And until we rethink our deepest assumptions about the corporation, we won’t be able to master the challenge of excessive CEO pay, or the inequality it generates. Is the CEO simply the agent of the company’s shareholders?
Is the corporation’s only obligation to return short-term gains to shareholders?
Or can we begin to think of the corporation in terms of the interests of all those who have a stake in its success—its customers, its community, and all of its employees?
The foundation of “pay for performance” is “agency theory” or “shareholder primacy.” The intellectual godfather of shareholder primacy is Milton Friedman, who wrote in 1970 that “a corporate executive is an employee of the owners of the business [i.e., the shareholders]. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible,”
The stakeholder corporation is not a new idea. The term stakeholder has been in circulation since the 1960s to characterize the key groups of people that support an organization. R. Edward Freeman brought it into the management world in 1984, when he published Strategic Management. The book proposed that effective management consists of balancing the interests of all the corporation’s stakeholders, including employees, customers, and communities.
The stakeholder corporation is not only a brilliant model, as the German economic success, especially in manufacturing, shows—it is also the key to the unresolved problem of CEO pay.
Shareholder primacy is now so self-evidently flawed that we should be emboldened to think of a range of options—through policy, corporate norms, and culture—for changing CEO pay practices. more> http://goo.gl/yzhzPP