So after Fox 5 shifted the originally planned segment from Monday to Tuesday and changed the time from 7:15am to 8:15am, they finally ran their story on the New York MTA. See the embedded video below.

If the video doesn’t work for you, feel free to visit Fox’s website (see Where the MTA Spends Money). In a story accompanying the video, Fox writes:

With an $800 million budget shortfall that has resulted in service cuts and the looming possibility of fare hikes, the MTA should look to cutting employee costs, Robert Salomon, a professor at the NYU Stern School of Business told Good Day NY on Tuesday.

“I think that’s the elephant in the room,” said Salomon.  “A full sixty cents on every dollar goes to employee costs”

From salaries, to health benefits and pensions, a significant amount of money is spent on employees.

MTA officials have said there are consolidating functions to reduce unnecessary spending, but at the end of the day, Salomon says it’s up to elected officials to force changes on the agency.

“It’s up to legislators to say enough is enough,” added Salomon.

Unfortunately I didn’t get to touch upon all the points that I came prepared to discuss, but I guess that’s what happens in a short segment.

I came armed with data. For example, not only do employee costs account for some 60% of the overall MTA budget, but its employment cost structure compares unfavorably with other large municipal transportation authorities (e.g., Boston, DC, and Chicago) and even a privately-operated transit company (e.g., Keolis). Believe it or not, the MTA spends in excess of $100,000 per employee in pay, benefits, and pensions ($7.2 Billion annually). It doesn’t even collect enough in revenue ($6 Billion in fares, tolls, etc.) to cover its employee costs.

That said, it was not my intent to bash unions on the show. I certainly hope it did not come across that way.

I am not anti-union by policy; however, the fact is that in the midst of the worst recession since the Great Depression, MTA employees are not sharing in the pain. In fact, in December 2009 the MTA was forced to grant a three year pay increase of 11% to the employees represented by the Transit Workers Union (TWU). This leaves commuters and taxpayers to shoulder the burden not only for the previously anticipated MTA budget shortfall caused by the financial crisis, but also the added shortfall caused by the mandated TWU pay increase.

This begs the question: How much more in taxes, service cuts, and fare hikes (which have significantly outstripped inflation over the years) can the commuter/taxpayer absorb???

And the worst of it is that absent the involvement of legislators, nothing can be done about the contracts that bind the MTA to overly-generous pay packages. This is why I said that simply streamlining existing operations and shedding administrative employees is not enough. It’s up to our elected officials to intervene, more equitably divide the pain among the parties involved, and say “Enough is enough!”

Given that the unions hold incredible sway with our public representatives, I am not holding my breath…

I will be appearing on Fox 5′s Good Day New York tomorrow morning (Tuesday) for a segment on the (mis)management of the New York MTA at 7:15am (changed to 8:15am). They want to discuss not just the financial trouble the MTA currently finds itself in, but also the organizational constraints that the MTA faces in trying to run as a leaner, more efficient organization.

The thing that strikes me about the MTA is how much of the organizational budget is dedicated – in some way, shape, or form – to employee costs. Nearly 60% of the total budget is comprised of payroll, overtime, benefits, and pensions. Wow!

The MTA does not compare favorably with its peers in this respect. And given the current structure of its contracts, I’m not sure there’s much the MTA can actually do about it in the near term.

Feel free to tune in if you’re interested in this topic, …and I’ll post a clip after the segment airs.

In a post several days ago (see Yuan Revaluation, Euro Weakness, and the US Recovery), I suggested that while I believe that the yuan ought to be revalued vis-a-vis the dollar, the crisis in Europe would likely put any such plans on hold. I wrote,

…although I agree that China needs to address the yuan-dollar peg, a gradual revaluation to competitive levels is probably the best outcome for the global economy. A sudden rise in the value of the yuan could come with painful near-term adjustments that derail the currently fragile global recovery.

But that said, there’s now an additional complicating factor: With the euro depreciating against both the dollar and the yuan, any plans that Chinese policymakers may have had to revalue the yuan against the dollar are likely to be put on hold…

Sure enough, there seems to be some chatter emanating from China that its policymakers are considering delaying a revaluation (see Yuan Revaluation Could Be Postponed, ht BA). According to the People’s Daily:

Worried about a depleting trade surplus and a possible slowdown of its economy later this year, China is not likely to accelerate pace to revalue its currency, the yuan, experts revealed.

The Beijing-based China Daily reported Wednesday that the chances of an early revaluation of the renminbi look unlikely and could happen much later than expected, considering that the nation’s trade surplus may see steep erosions due to the European debt crisis and the growing trade protectionist measures against China.

Interestingly, and quite compellingly, Michael Pettis argues that this is exactly the wrong response (see Don’t Misread the Euro Crisis). Instead, he argues that now is precisely the time for China to change its trade policy.

The Greek crisis, rather than reduce the urgency for China to revalue its currency and adjust its trade policy, may on the contrary require that China react much more aggressively than originally planned. Why? Because any sharp adjustment in trade or capital flows in one part of the world must automatically force a series of equally sharp adjustments elsewhere…

This need to balance implies that the problems in Europe are going to make international trade relations, and especially those between China and its largest trading partners, much tenser. In fact I worry that the sudden and unpredicted speed of the European adjustment will force a resolution of the global imbalances at a far faster pace than I, already pessimistic, was expecting.

…is there anything that China can do to head off conflict?  Yes.  It can buy euros, the more the better – just lift every offer out there. By strengthening the euro, or at least limiting its weakness, this strategy will force the brunt of the adjustment back onto European surplus countries rather than onto the US and, via the US, back onto China.  Sarkozy and other European leaders might not be very happy, of course, but they will be at least partially mollified by the net capital inflows and the reduced humiliation of a collapsing euro.

Interesting. Definitely some food for thought. And I encourage you to read his post in its entirety. But still, I can’t help but wonder whether the political will is there to follow through on such a strategy. My hunch is that policymakers will resist change until forced…

Fordham University hosted the W. Edwards Deming Memorial Conference last week at which the participants addressed the future of the MBA degree (see MBA Under Siege: Reimagining Management Education). The speakers who presented were truly impressive scholars who have been among some of the most vocal critics of the MBA degree. Given my interest in the business of Business Schools (see, for example, Op Ed on Business Schools and the Financial Crisis), I was extremely disappointed that I was not able to attend.

Thankfully, one of my colleagues, Seth Freeman, was there. He was kind enough to share his notes from the conference. They can be found below the break.

Seth has asked me to make clear that with the exception of his thoughts that appear in parentheses below, his account of the events describe the panelists’ perspectives as they were conveyed, not his own.

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The Tragedy of B-Schools and the Danger of Lost Legitimacy

The sense of the conference was that B-schools bear significant responsibility for the 2008 financial crisis by emphasizing a myopic and selfish approach to business crystallized by Agency theory.

This emphasis, and the damage it has done to the economy, has called the very legitimacy of the MBA into question, several panelists argued.

B-Schools Train Loose Individuals; the Tragedy of Toyota

Rakesh Khurana,  Professor of Leadership Development at Harvard Business School, warned that such a perspective, has bred a generation of ‘Loose Individuals’ who do not feel constrained by social norms of fairness or equity; who lack any sense of moral responsibility, and for whom the very idea of a larger duty to community and society seems alien or communistic, a sentiment most panelists (though not all) amplified.

Andrea Garbor, Chair of Business Journalism, Baruch College, noted that Toyota recently admitted the cost of this myopic and self-interested approach. Until recently, it was  a very profitable firm that made great cars led by old-school process experts who applied the systems principles of Edward Deming. But it’s become a troubled, highly criticized firm led by MBAs who myopically focused on finance and quick growth.

A Norm of Wall Street Arrogance?

Several panelists noted that an ‘MBA’ has come to mean a shallow, self-seeking, and arrogant person. Khurana reported that student-led studies at Harvard Business School found that graduating MBAs mostly felt less competent after going through the program, unless they fit into the subculture of white, male, American born New York investment bank financial types.

Kill the MBA

Henry Mintzberg, Professor of Management Studies at McGill, argued that the MBA promises something it simply cannot deliver and that it actually makes business worse by falsely encouraging 25 year-olds to think they can manage anything. Management, he said, is a practice, not a science or profession- a practice you can only nurture once someone is out there doing it.  So teaching inexperienced students is a waste of time, or worse.

Mintzberg also challenged the case method for the pretense that one can speak insightfully about a business after reading facts for a couple of hours, and that it overlooks the point that gathering facts is one of the key tasks of management.

He described a program he leads where managers largely learn by talking with each other around tables in class about how their work interacts with their training.

He argued for reform in several ways:

1. Shift classroom teaching from a ‘sage on stage’ approach to a ‘guide on the side’ approach, and help managers learn from each other mainly
2. Do not attempt to teach 25 year-olds how to manage.
3. Offer different training for 25 year-olds (who know little) than you offer to 40 year-olds (who know a lot and best learn from each other)
4. Replace the MBA with the more truthful ‘Master of Managerial Science’ and ‘Master of Science in Business’ degrees. Or keep it but stop calling it ‘management’ training, since it’s mostly about specialized training in finance and economics and not administration.
5. Look to second tier English business schools for truly exciting, innovative programs and courses.

Authentic Leadership

Michael Jensen, Emeritus professor at HBS,  spoke about his effort to go beyond the Agency theory he championed and to teach Authentic Leadership at Harvard, an approach which emphasizes the centrality of Integrity, Personal Authenticity, and Passionate Commitment.

(Ironically, Prof. Jensen did not respond to the claim by other panelists that his past advocacy for Agency theory may have hurt our society. And he was hard-pressed to offer examples of leaders who rose to the top following the principles he advocates now.)

Beyond Agency Theory- Greater Emphasis on Community, Society, Ethics…Even Theatre Arts

Most emphasized the need to move away from a myopic and self-defeating focus on narrow personal self-interest emphasized by economics and finance, and the need to train students to see the effects of their decisions on other stakeholders. Ed Freeman, a Professor of Business Administration, at Darden, though a self-described libertarian, shared this view with other panelists.

Several emphasized the need for stronger ethics training; others challenged the idea.

Several spoke of other changes to cultivate breadth, depth, and social awareness, arguing for inter-disciplinary training, combinations of design and business, liberal art education, even teaching B-school students to produce and act in plays.

MBA as Value Creator

Though few spoke positively about MBAs and B-Schools, some noted toward the end that B-School can and sometimes does even now cultivate socially aware, value creating leaders.

Change? It Will Likely Come from Outside Pressure

Change, several argued, will have to come from the outside, because even now, schools, deans, and even the AACSB have strong incentives to maintain the status quo.  Look for pressure from for-profit schools, corporate training programs, and recruiters who stop hiring MBAs.

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Interesting. Thanks for sharing Seth!

When it comes to the heavily-debated topic of yuan revaluation, I am in the camp that believes the yuan is undervalued overvalued and ought to be revalued. That said however, I have advocated caution with respect to how soon and how fast such an appreciation should take place. My main concern revolves not only around the impact of a yuan revaluation on the Chinese economy, but also its knock-on effects to the U.S. economy (see China and the Revaluation of the Yuan and Yuan Again).

In the former post I opined:

Think about the short-term shock to the Chinese economy, which depends upon exports for a good portion of its GDP. By many accounts, exports make up some 25% of Chinese GDP. A revaluation of the yuan makes Chinese exports relatively more expensive thereby decreasing foreign demand for Chinese-made goods. This negatively impacts local production and creates a feedback loop through to domestic employment and wages. In the extreme, this threatens social stability, and China is certainly not the poster-child for social stability.

Not only that, but given the foreign interests and investments in China, it is not entirely clear to me that a yuan revaluation that catapults China into recession would not result in a global contagion effect. Supply chains are so interconnected around the globe that an upward price movement for intermediate and finished goods coming out of China could have dire consequences for Western companies that rely on Chinese-sourced goods (just ask Wal*Mart).

In the latter post I added:

…the near term economic adjustments associated with a significant rise in the value of the yuan could be painful, not just for China, but for the rest of the world as well. In addition, a sudden rise of the Yuan could be socially destabilizing for China. Given China’s already tenuous political and social situation, it is therefore difficult from a policy standpoint for Chinese politicians to justify…

So basically, China has made a commitment to a production-based, export-oriented economy. Although it certainly is in the long-term interest of China to rely less on domestic investment and exports while encouraging domestic consumption, such an adjustment takes time and there are adjustment pains associated with such a shift. Similarly, any shift of the US economy from one that relies on consumption to one that is centered around production would likewise take time and require some painful adjustments.

I was therefore not surprised to see a recent article summarizing the stance of Justin Yifu Lin (chief economist of the World Bank) with regard to a yuan revaluation. He echoes the sentiment I expressed, and details the nature of some of those “painful” adjustments (see Revaluation Would Hurt U.S.).

The chief economist for the World Bank said on Saturday that if China were to revalue its currency it would actually hurt rather than help the U.S. economy.

He acknowledged that if China stopped selling renminbi and buying foreign currencies, the policy that critics say keeps the currency artificially undervalued, Chinese exports would become more expensive.

But he said because most of the products China exports to the United States are labor-intensive goods U.S. manufacturers stopped making years ago, the U.S. would only have two choices: buy the products from other countries or from the Chinese.

Either way, Lin said, the cost of those goods would rise for U.S. consumers and that would depress both consumer spending and job creation in the United States.

So again, although I agree that China needs to address the yuan-dollar peg, a gradual revaluation to competitive levels is probably the best outcome for the global economy. A sudden rise in the value of the yuan could come with painful near-term adjustments that derail the currently fragile global recovery.

But that said, there’s now an additional complicating factor: With the euro depreciating against both the dollar and the yuan, any plans that Chinese policymakers may have had to revalue the yuan against the dollar are likely to be put on hold (see Europe’s Debt Crisis Casts Shadow Over China).

The pain of the European debt crisis is spreading as the plummeting euro makes Chinese companies less competitive in Europe, their largest market, and complicates any move to break the Chinese currency’s peg to the dollar.

…in light of the euro’s nose dive, such a move could be difficult. Letting the renminbi rise against the dollar would also mean a further increase in the renminbi’s value against the euro, creating even more problems for Chinese exporters to Europe.

Some Chinese companies are already running into difficulty because of the euro’s fall against the renminbi.

“We have been receiving calls from some European clients who signed contracts with us earlier this month, and they all want to cancel their orders, since the depreciation of the euro has eroded all their margins and then some,” said Elvin Xu, the sales manager of Guangdong Ouyi Electrical Appliance in Zhongshan, China, which makes gas stoves, heaters and water heaters.

“They say they cannot increase the prices at their end to their customers, given intense competition in their marketplace,” Mr. Xu added.

In an example of just how interconnected the global economy has become, it is not just Chinese exporters that are adversely impacted by the weakness in the euro, but U.S. exporters as well.

Because American companies in particular compete in the Chinese market with European companies in many industries, the euro’s weakness against the renminbi is putting American companies at a disadvantage.

And the effects are not limited to China.

Euro weakness (dollar strength) lowers the overall profitability of American multinational corporations. It lowers profitability through the repatriation channel (each 1€ of profitability is now the equivalent of only $1.23 in profit). It also reduces the profitability of American exporters as U.S. exports become more expensive in European markets reducing demand for U.S. goods. And it makes it more difficult for American companies to compete with European companies not just in China, but in export markets worldwide as European products become relatively cheaper.

So the problems in Europe that some pundits believe are now largely contained can have serious consequences for global economic growth. And as the New York Times article rightly concludes:

…even China — the world’s fastest-growing major economy and increasingly the engine of global growth — is not immune to the crisis that started in Greece…

Abu Dhabi Hotel Installs Gold Vending Machine (ht, Gene):

There’s no mistaking what’s in this vending machine. The well-heeled in the Gulf can now grab “gold to go” from a hotel lobby in the United Arab Emirates, when the need for a quick ingot strikes.

On Thursday, a day after its inauguration, the shiny machine attracted spectators of many different nationalities who gathered to watch whenever an enthusiast was struck with the urge to splurge on a bar of the precious metal.

Abu Dhabi’s Emirates Palace Hotel became the first place outside Germany to install “gold to go, the world’s first gold vending machine”…

When I saw the headline I had to do a double-take. I was convinced it was an article from The Onion. But then it struck me, “Holy Cow, this thing’s for real!”

Too funny.

Rob Cox and Rolfe Winkler penned an opinion piece in which they argue that GM ought not re-enter the finance business (see Perils of Finance for Carmaker). They are absolutely right!

The carmaker [GM]…is weighing a return to the finance business, possibly by acquiring its former unit, GMAC. Such recidivism is troubling on many levels.

G.M.’s challenge was not to recreate its past footprint…but to slim it down. While G.M. jettisoned or pledged to shutter some of its smaller distractions, including Saab, Pontiac, Hummer and Saturn, it retained its biggest, Europe’s Opel.

That decision might have been defensible based on the remuneration G.M. would have received, the automotive technology it would have transferred and the prospect that it could turn this leg of its core car business around.

Despite the foregone revenue that its sale would have generated and the cost of restructuring/operating it, I agree that keeping Opel is strategically defensible. Opel is obviously highly-related to GM’s existing lines of business, and it is a repository of small car technology.

But that would not be the case for a return to banking, even one focused on financing car purchases.

For one, it’s a clear case of mission drift. G.M. has yet to repay the government for its $50 billion conversion of loans into a majority stake. G.M. executives might argue that boomeranging into auto financing makes G.M.’s equity more appealing, thus paving the way for a more robust initial public offering of stock in the company.

That’s not obviously true. G.M.’s priority — and one that public shareholders would reward — is to return to a level of sustainable profitability as a manufacturer of decent cars. Even after wiping out $90 billion of debts and other obligations, G.M. failed to make a profit in the second half of 2009.

Another plausible argument might be that without a captive financing arm, G.M. is at a disadvantage by being unable to offer cheap loans to consumers. Yet that’s precisely the kind of poor credit judgment that led G.M. to divert its attention from quality and GMAC to make dud loans and mortgages that culminated in a $17 billion taxpayer rescue.

I could not agree more.

Just because the economy is showing signs of recovery does not mean that it is time to return to business as usual. Have we learned nothing?

GM needs to focus on making cars that consumers want, and doing so profitably. The business of financing automobile purchases is better left to a disinterested third party.

Ultimately, Cox and Winkler conclude that rather than reflecting sound strategic judgment, any decision to re-enter the financing business would simply reflect CEO Ed Whitacre’s personal desire to rebuild the GM empire (for background on the role empire building and managerial hubris play in acquisitions see Acquisitions: A Great Shareholder Ripoff and Why M&A Deals Go Bad).

As an American taxpayer, and hence GM owner, I do not believe such a move would be in the best interest of the shareholders.

At this point it should come as no surprise to anyone that the European Union has committed to a large rescue package with a headline number of around $1 trillion (see EU Rescue Package for details).

With the caveat that I am not a macro-economic specialist (my specialty is in firm behavior), I share with you my initial thoughts on the bailout.

First, the good:

1. Wow! The EU countries were able to overcome their differences and react with a unified voice and purpose. They did so in a swift manner and committed an extraordinary sum of money to try to address a problem whose gravity they had, until this point, largely chosen to ignore, …or at least treat with benign neglect.
2. The capital committed, in my opinion, is large enough to help meet the short-term funding needs of the countries that might need to draw upon it (think Greece, Portugal, Spain). Greece had been largely shut out of external capital markets, and Portugal and Spain were following not too far behind. The weaker peripheral countries can now turn to the EU/ECB and IMF to raise funds that they might have trouble otherwise raising on their own.
3. The rescue package not only bails out the peripheral (PIIGS) European countries, but it also bails out the banks. For example, if you were a European bank sitting on a helping of Greek debt, imagine how your balance sheet looked on Friday given the market’s expectation for Greek default and how it looks today now that the ECB has announced that it will buy debt issued by the weaker European nations in the secondary market. Whether the banks deserve such a bailout is certainly open to debate, but the actions taken by the ECB will keep credit markets from freezing in the near term.

Now, the bad (or at least the part that gives me pause):

1. The obvious: Moral Hazard (see Go Hog Wild). How long will the richer European nations continue to allow their debt-addicted poorer brethren to behave badly?
2. Aside from the guarantees and the liquidity provisions, I am not seeing any meaningful change in the debt burdens facing Greece and the other PIIGS nations. There is no debt restructuring from what I can tell. Given that there is no debt relief for the PIIGS, it is likely that several of the PIIGS will be forced to tap the rescue packages.
3. My understanding from the rescue program is that if a country taps into the funds, it will be subject to mandated fiscal austerity programs. As we have seen in Greece, additional (and forced) fiscal austerity is likely to be poorly received, …so get ready for additional social unrest and political turmoil.
4. Assuming that the countries that agree to the mandated fiscal austerity programs are able to do so with minimal social unrest and political turmoil, the fiscal adjustments will come with negative shocks to the real economy. It will result in, at the least, lower economic growth in those countries that are forced to tap into the rescue funds, and at the worst, a severe recession that could have spillover effects even on the stronger European nations.
5. All this aid, and there’s still no guarantee that the weaker PIIGS nations will not ultimately default. So for all its benefits, all that the rescue package might achieve is to push the day of reckoning for many of these nations further into the future.

Taking stock therefore, the rescue seems to me like an attempt to buy some time for the struggling European economies while hoping that economic growth (or inflation) can emerge that will help those nations escape their debt problems.

Again, these are just my initial impressions. It will take some time for the dust to settle to see how the bailout plays out. For those of you looking for a deeper analysis from scholars whose specific interests and expertise lie in the analysis of macro-economic issues, I refer you to Simon Johnson, Paul Krugman, and Nouriel Roubini.

The Economist ran an article last week reviving the decades-old debate between models of shareholder wealth maximization and stakeholder wealth maximization (see A New Idolatry).

The basic idea behind the shareholder wealth maximization model is that a firm’s sole purpose is to maximize shareholder value (i.e., share price). The stakeholder view offers a different (although not necessarily contradictory) perspective.

According to stakeholder theory, the aim of the firm is to maximize value by taking the concerns of all its stakeholders, not simply its shareholders, into consideration. That is, firms ought to incorporate stakeholder – shareholder, supplier, customer, employee, community, and any other constituency with a “stake” in the firm – interests into their decision calculus, thereby generating value not just for shareholders, but also for society at large. It shifts the maximization problem from one of individual utility maximization (in the interest of shareholders) toward one of joint utility maximization (balancing the disparate concerns of various interested parties). Wikipedia provides a and brief overview of stakeholder theory for anyone interested in reading more (see Stakeholder Theory).

Oh yeah, back to The Economist article:

The economic crisis has revived the old debate about whether firms should focus more on their shareholders, their customers, or their workers.

[The shareholder maximization model] has dominated American business for the past 25 years, and was spreading rapidly around the world until the financial crisis hit, calling its wisdom into question.

…Roger Martin, dean of the University of Toronto’s Rotman School of Management, charts the rise of what he calls the “tragically flawed premise” that firms should focus on maximising shareholder value, and argues that “it is time we abandoned it.” The obsession with shareholder value began in 1976, he says, when Michael Jensen and William Meckling, two economists, published an article, “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”, which argued that the owners of companies were getting short shift from professional managers. The most cited academic article about business to this day, it inspired a seemingly irresistible movement to get managers to focus on value for shareholders. Converts to the creed had little time for other “stakeholders” …[and] American and British value-maximisers reserved particular disdain for the “stakeholder capitalism” practised in continental Europe.

I have long been a proponent of a more stakeholder-oriented approach. However, I admit that it might be a bit difficult to advocate for European versions of “stakeholder capitalism” given the recent problems in the PIIGS nations.

That notwithstanding, I think the shareholder-stakeholder divide speaks to one of the fundamental criticisms of the field of financial economics, and its dogged adherence to the shareholder wealth maximization paradigm (see The Future of Financial Economics and Part Deux for criticisms of that approach). Back in March of 2009 I wrote:

…I have had more than a few conversations with prominent economists and sociologists about the social implications of a dogmatic adherence to models of shareholder wealth maximization. Unfortunately, if incentives are structured such that they exclusively reward shareholders (and in some cases, managers) at the expense of other constituents (stakeholders), this could lead to suboptimal social outcomes.

Shareholder maximization vs. Stakeholder maximization has been a topic of considerable debate in the strategy literature over the past 15-20 years. And given the social costs of this financial crisis, I would not be surprised to see the Stakeholder view gain more traction in the years to come.

Although I have been an advocate of a more stakeholder-oriented approach, this is not to say that there are not valid criticisms that can be leveled at stakeholder theory. The shareholder maximization approach is appealing precisely because profitability and share price are quantifiable, and easily measured. However, concepts from stakeholder theory defy quantification in a conventional sense. It’s not always clear which are the right stakeholders to pay attention to, and even if you can identify the appropriate stakeholder set, how do you weight their interests accordingly? In addition, how do you quantify, for example, when firms are effectively meeting the needs of their local communities, and what those needs are to begin with?

Admittedly, the stakeholder view of the firm is still in its infancy, but given its broader social implications, and in the wake of the financial crisis, I think it is well worth the effort to try to advance the field.

In recent years I have worked with Michael Barnett of Oxford on ways to better quantify stakeholder performance, and on how to bridge the stakeholder-shareholder divide. Other scholars in strategy, management, and finance are likewise devoting increasing attention to this topic. I am therefore hopeful that we, as a field of organizational scholars, will come to some new understanding in this respect.

Of course, the Economist article that I quoted does not break any particularly new ground in this respect; nevertheless, I am glad that folks in the mainstream media are finally starting to pick up on the shareholder-stakeholder debate. I am convinced that it remains an important one, and the truth is: It is a debate well worth having.