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I have harbored the belief for sometime now that the excess greed and incompetence in American business is due to the fact that few CEO's hold a personal stake in the companies that they control. Unlike business like Microsoft of Apple, these hired guns are just in it for the golden parachute. They don't come up through the ranks anymore, they just get hired out of Harvard or Wharton. As a result they really don't understand the companies culture or even its products. If the company goes belly up, no skin off their personal self-esteem.
So, low and behold, I ran across this 2003 article about a study by Ronald Anderson of the Kogod School of Business at American University, and David Reeb of Culverhouse College of Commerce at the University of Alabama that found that:
"...the performance of family companies to nonfamily companies. Using a combination of accounting and stock-market measures, the authors concluded that companies controlled by family members were 5.5 percent more profitable and achieved 6.65 percent better return on assets than their nonfamily counterparts. Family-run companies also were valued 10 percent higher by the stock market than nonfamily companies."
So, if we want to have more innovative companies with a stronger sense of loyalty to their shareholders and their employees, we should close all the MBA schools (ok, this is a bit tongue and cheek but so hope I you get the point).
Agree - though upcoming we have a nation of Cinema Studies majors, not sure if that's an improvement. I think the MBAs were a great reflection on MBA programs - they were trained to exploit financial possibilities and by golly they did. They grew from the rape-and-pillage culture that became trendy in the Reagan years.
But I think with a new atmosphere of regulation, stricter oversight, tighter credit and normalizing stock values, the era of detached management may be fading into the past (except for the really big companies). The Shareholder Vote on Executive Compensation Act would allow a (nonbinding) shareholder vote on exec. compensation, but it hasnt passed the Senate yet I dont think.
Short answer is I hope you're right, I hope it quickly becomes an ugly chapter from the past that we'll all surely remember next time the wheel rolls around
Simply because I'm such a snob (!), I'd like to point out that the line in Shakespeare about killing all the lawyers comes from Richard III, and is uttered by the villain himself. The reason Richard III wanted to kill all the lawyers is that they kept pointing out how him usurping the throne was against the law. You know, because breaking the law is so much easier with no lawyers around. Therefore, Shakespeare's basis for killing all the lawyers wasn't their greed or incompetence, but an excess of integrity.
I think the MBAs were a great reflection on MBA programs
During the Reagan years I had he unfortunate opportunity of sharing a few classes with these future pirates who were attending the Johnson School of business. They were a scary and rapacious group of individuals.
On a personal note, my wife's company ousted its founder, who was replaced by a bevy of these biblical money lenders who promptly set about dismembering its various components only to later find that the core business was totally dependent upon its newly severed parts. Instead of timely production from its new Indian subcontractor, publications now are three days late and a market short. They were so busy, laying off people, that they now sit on vast real estate holding which are unproductive and unprofitable, the former occupants have been sent home to work, less productively I might add.
During the Reagan years I had he unfortunate opportunity of sharing a few classes with these future pirates who were attending the Johnson School of business. They were a scary and rapacious group of individuals.
On a personal note, my wife's company ousted its founder, who was replaced by a bevy of these biblical money lenders who promptly set about dismembering its various components only to later find that the core business was totally dependent upon its newly severed parts. Instead of timely production from its new Indian subcontractor, publications now are three days late and a market short. They were so busy, laying off people, that they now sit on vast real estate holding which are unproductive and unprofitable, the former occupants have been sent home to work, less productively I might add.
There are lots of horror stories of these pirates - good word for them - set loose on businesses and business law to tinker and play and see what happens. It's gone on far too long.
Shakespeare's basis for killing all the lawyers wasn't their greed or incompetence, but an excess of integrity.
And apparently, things have changed slightly since Shakespeare's day.
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