Stakeholders, shareholders, and business education

The Economist tackles the debate over companies’ duties to stakeholders and shareholders. Were managers and decisionmakers motivated by the wrong incentives?

A firm’s share price on any given day, needless to say, can be a very poor guide to long-term shareholder value. Yet bosses typically had their pay linked to short-term movements in share prices, which encouraged them to take measures to push the share price up quickly, rather than to maximise shareholder value in the long run (by when they would probably have departed). Similarly, private-equity firms took on too much debt during the credit bubble, when it was available on absurdly generous terms, and are now having to make value-destroying cuts at many of the companies in their portfolios as a result.

Meanwhile, USA Today points out that the events of the past year have reinforced the need to incorporate new lessons into business school curricula:

Though these were all pre-financial crisis concerns, the high-profile ethical lapses that helped precipitate the downturn have only intensified the sense that MBA programs need to do more to create ethical graduates.

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