The Corporation in the 21st Century: Why (Almost) Everything We Are Told About Business Is Wrong

A single-minded focus on shareholder value has caused a “crisis of legitimacy” in the corporate sector, according to this probing treatise. Financial Times columnist Kay (Other People’s Money) suggests that during the first half of the 20th century, rigid hierarchical command structures in the workplace were succeeded by relatively decentralized professional management that relied on relationships between workers and bosses to transmit knowledge. This changed for the worse in the second half of the century as executives came to see boosting profits as a corporation’s sole responsibility, Kay writes, contending that the emphasis on shareholder value made workplace relationships more transactional and hindered collaboration, with sometimes dire consequences. For instance, he suggests that Boeing executives’ unwillingness to heed the warnings of test pilots and other employees concerned about faulty airplane software resulted in a string of deadly disasters that cratered the company’s stock value. Kay’s solutions are more philosophical than practical, emphasizing the need for more meaningful relationships “within the workplace and... between business and society at large.” Discussions of the “principal–agent problem” (when the desires of an entity and its representative diverge) and whether a corporation can accurately be described as a “nexus of contracts” feel a bit esoteric, but Kay’s astute overview of the corporation’s recent history enlightens. Business students ought to check this out. (Jan.)