Remember judgment? It still appears in the dictionary (in my Oxford: \u201c1 the critical faculty, discernment\u2026 2 good sense\u201d). Judgment used to be a key to managing effectively, even if hidden in the dark recesses of the human brain. And then along came measurement, in the dazzling light. It was a good idea, so long as it informed judgment. Too frequently, however, it replaced judgement.<\/p>\n
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In 1981, the Business Roundtable, a grouping of the chief executives of America\u2019s leading companies, issued their \u201cStatement on Corporate Responsibility.\u201d<\/p>\n
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The shareholder must receive a good return but the legitimate concerns of other constituencies (customers, employees, communities, suppliers and society at large) also must have the appropriate attention. . . . [Leading managers] believe that enlightened consideration \u2026 will best serve the interest of [the] shareholders.<\/p>\n
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In 1997, the Business Roundtable issued another statement, entitled \u201cStatement of Corporate Governance.\u201d This one, about \u201cShareholder Value\u201d, reversed the previous one, claiming that the paramount duty of management and boards of directors is to the corporations\u2019 stockholders. It explained:<\/p>\n
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The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors. It is, moreover, an unworkable notion because it would leave the board with no criteria for resolving conflicts between the interest of stockholders and of other stakeholders or among different groups of stakeholders.<\/p>\n
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No criteria indeed\u2014except judgment! Somehow, between 1981 and 1997, America\u2019s most prominent CEOs lost their capacity for judgment. If you want to understand what has been behind the problems of the American economy since then, here you have it, right from the horses\u2019 mouths. (See http:\/\/www.mintzberg.org\/enterprise<\/a>.)<\/p>\n <\/p>\n In 2009, Jack Welch, America\u2019s superstar CEO (of General Electric, from 1981-2001), declared famously that \u201cOn the face of it, shareholder value is the dumbest idea in the world.\u201d But wait a minute Jack: you were a member of the Roundtable that issued that 1997 statement. In fact I have been told that you championed it (although this I cannot confirm, and you are presumably not telling).[1]<\/a><\/p>\n <\/p>\n In any event, thank you Jack for your dumbest statement–after the damage was done, and continues to be done. Thank you on behalf of all the employees who were either \u201cdownsized\u201d or shifted to lower wages, in the name of \u201cproductivity\u201d (and so helped to bring on Donald Trump). Thank you on behalf of all the customers who have had to put up with appalling services and lousy products at higher prices since that 1997 statement. Thank you on behalf of all the decent companies that were destroyed so that a few CEOs could run off with \u201cshareholder value.\u201d<\/p>\n <\/p>\n Where has all the judgment gone?<\/p>\n <\/p>\n \u00a9 Henry Mintzberg 2016. Originally posted on mintzberg.org\/blog<\/a>, 31 March 2016.<\/p>\n <\/p>\n About the author:<\/strong><\/p>\n Henry Mintzberg,\u00a0Cleghorn Professor of Management Studies at McGill University, is the author of\u00a0<\/span>Rebalancing Society<\/a><\/i>, and a\u00a0weekly\u00a0<\/span>TWOG<\/a>.<\/p>\n <\/p>\n