This is one of the things that puzzles me the most - that companies consider shareholder value more important than employee interests. Should a company consider exceeding the cost of capital given to it more important that the welfare of the employees who labor for it? Who is more important? Infact, this was one of the first questions I ever asked Prof. Mohanty... he just by-passed it saying shareholder value maximization is an assumption made in modern finance. I still haven't found the answer and continue to be puzzled by it. I guess at some stage these things lead to questioning the very nature of capitalistic thought now. I was pleasantly surprised when I came across this blog post (on bubblegeneration - through thyagi) on Sumantra Ghoshal's later work researching this very question.
Article: Bad Management Theories
4 comments:
Was going to blog about this but you beat me to it :)
There is no definitive answer to it. It depends on whether you are a "left-wing conservative" or a "liberal right-wing" economist. If you are Adam smithian the answer is " a firm exists to make profits" . Deviating from this, only results in social costs and moving away from market economics.Actually, If companies exist for profits then employees will actually stand to benefit in the long run ...
this is some debate.. occured to me too.. esp. since i am an employee and i can't believe shareholders and other big investors get a share of company profits while all we get is a monthly allowance with a leettle variable component despite working 12 hours.
if i could, i'd make democratic companies - for, by and of the employees.
(of course then some of us wud get freakin rich and go off to build un-democratic companies ourselves :D)
wb to the blogosphere btw :D
... the issue is that its good to go with a measure like shareholder value for a macro perspective, but at an individual level, I believe companies do not reward employees as much as the reward shareholders. Also, what ghoshal is arguing is very true.. more risk is borne by employees than by shareholders - at present, it looks like its better to make your money work for you than working for money :) as the rewards are greater for investment than work.
Post a Comment