Corporate leadership - Maximising shareholder value (MSV) is a finite mindset.

Maximising shareholder value (MSV) has been the normal in big business for a very long time. MSV in simple terms, shovels money to shareholders, CEO's and executives at the expense of the other stakeholders, being customers, employees, societal and environmental considerations.

Harvard school professors Joseph L. Bower and Lynn S. Paine declared in Harvard Business Review (HBR), that MSV is "the error at the heart of corporate leadership. Flawed in its assumptions, confused as a matter of law, and damaging in practice".

If we understand shareholders are the owners of the corporation, we need to also understand shareholders are protected by legal liability from any legal responsibility for the company. General shareholders who buy, sell and trade their shares in general terms have no real interest in how the corporation makes its profits. It is in fact a transactional process that is finite in terms of profit in a dollar value.

Private companies for the most part have managed their organisation in a similar fashion, obviously not all private companies that are large in size fit this summary, but for this article we are generalising. Private companies often employ CEO's and executives from larger corporate organisations to enhance their business. Whether owned by shareholders or the private sector, the way both types of companies have been managed through corporate leadership appear to be very similar.

This article looks at leadership and management strategies consumed on maximising profits. Furthermore the article looks at the assumptions made during the 1970's and the influences that led us to where we are today. In terms of leadership and management, this paper points further to how CEO's and senior management teams have been mentored, coached educated and trained over the past forty plus years with the context of concentration being on maximising profits. Obviously not all businesses are the same, but we are generalising across the board. Leaders and managers have not exactly been consumed with building relationships in the workforce, when profits are prioritised, ethical fading is a constant position a company finds itself in and the workforce unfortunately have beard the brunt of the strategy.

Milton Friedman's well-known New York Times Magazine article in 1970, publicly criticised "Corporate Social responsibility" In 1976 journal of financial economics article "Theory of the firm" by Michael Jensen & William Meckling, it was suggested,

"Managers are delegated decision-making authority by the

corporations shareholders and are thus 'Agents' of the shareholders.

As agents of the shareholders, managers are obliged to conduct

the corporations business in accordance

with shareholders desires."

While the 'theory of the firm' is a detailed analysis, the centre point of this article is directed towards decades of direction given to managers by leaders. Baby boomers in their prime business years were at the helm, or on their way to senior executive positions driven by finite mindsets during a large portion of the years since these theories were supported. This point is brought into consideration to understand todays generational gaps and the changes in social responsibility that todays society simply expects.

Again, when we refer back to how leaders and managers have been trained and educated, it was these ideas, assumptions and those theories that gave direction to company owners and their shareholders. In this authors time across three decades in business at various levels, profit has 90% been the single most important factor for organisations I have worked in. If you ask the leader what the single most important factor of the organisation is, the answer 9 times out of 10 is profit, followed by customers and then employees.

Today, employees are using the internet as a platform to voice their opinions about a range of issues that are important to them, pre the internet, there was no real way of disputing anything with out a union movement or a march on the streets. It would possibly make the news for a day and that was about it. Today, digital natives (millennials and Gen Z) are more connected socially than any other period in time, and they are not afraid to tell the world what they think of organisations, brands and products if they perceive organisations are not doing the right things including ethical fading.

Effectively, people power has brought some change through external voices like social media and various newsworthy platforms, however, for the most part, the baby boomers who in some cases are still at the top end of the helm along with handovers to generation X, and change is a hard thing to break when you have been programmed your whole life to lead in a profit driven way. For some, these times that are now upon us is a time to cash in the chips and retire from the new age. For others, change is welcomed but at what level of the senior management tree, are we getting through too.

This leads to a large amount of conversations in the business world around "The great resignation". As an example, we understand that employees have re considered what is important to their life as a result of the pandemic in 2020. Those considerations also include the organisations they work for, how they feel they are treated, social impact, the working environment, job security and so on, which ultimately lead employees to consider if they have any purpose when working in the organisation.

So how did this all come about, why are employees and the workforce not falling inline with the profit driven regime? If we consider that the majority of big businesses only share the loot with CEO's and senior management teams who have enjoyed huge salaries and bonuses, why would employees put up with managers with poor human skills, threats of being fired if they don't reach sales targets or KPI's. Some will read this and take great offence, but for an employee not at management level, it would be fair to say that many have either been dumped out of a job or at least been driven to find a new job. You can't make this stuff up, some organisations simply treat employees as a transactional process and workers have been programmed to understand this too.

The workforce environment reeks of low trust, driven by highly skilled employees with poor attitudes resulting in toxic environments. Is it any wonder why some organisations who for years mistreated their employees as merely numbers are now screaming from the rafters that "they can't find any talent and know body wants to work!"

Has there ever been a time where it was different? Well, yes there have been great examples of visionary leaders who just did things completely opposite compared to the majority of corporate leaders. I summarise this story found in author Simon Sineks "The infinite game". A Trip back in time to when Walt Disney made his production company. At the time Disney's just cause was to give people a place to escape and imagine, to see things in a different light and perspective and really, it was all about having fun. He ran his production company in much the same way, Disney was well liked and he shared his money with the people who made his company successful. Not the executives, but everyone who was on the payroll.

Eventually Disney was persuaded to go public with his company and almost immediately, things changed. Disney company now resembled any other corporate enterprise comprised of senior management teams who were more interested in creating value for shareholders than continuing the just cause Disney had conceived throughout the company. And then it started, only management got bonuses, the environment and culture had changed and before to long union disputes were on the doorstep.

15 year after building his extremely successful business, Disney no longer felt his production company was was aligned with his cause, it simply wasn't fun anymore. He cashed out and sold all of his rights and shares to the business. Disney didn't need to work again, he could of sat back and enjoyed the fruits of his labour for the rest of his years. There was no need for Disney to take any risks or the need to invest in any other adventure.

Disney started a new company called WED, he wanted to create a place for children and their parents, it was called Disneyland. Disney's vision and infinite mindset was all about the long game and creating an environment that everybody could love and enjoy for many years to come was at the heart of his just cause. Although a risky venture, Disney was full steam ahead, most of his friends and workers from the Disney production company were also keen to work for Disney again, with positive attraction to how Disney look after his employees and the environment in witch they prospered. The Disney example on managing a company with an infinite mindset is in stark contrast to the shareholder profit driven corporate leaders that made up the majority of management strategy for the majority of organisations.

Finite minded CEO's, Executives and managers are are concerned with short term goals, they place profit above all else. Sinek suggests, Infinite minded leaders like Walt Disney have a just cause, he simply wanted a place where children and parents could go to have fun, he wanted his employees to have fun and enjoy the place for years to come. When new technology came along that could enhance Disneyland, Disney had no hesitation in embracing it and investing in it, he simply did whatever he could to create a magical wonderland that we know know as Disneyland.

When we look at todays workforce, we can see how leaders have been programmed differently with the odd exceptions like Disney. The short term game of who is the best and most profitable, and the long term game where business would go on forever, by having a cause or a purpose, and doing everything it could for all stakeholders, the employees, the customers, society, the environment and shareholders.

Organisations today need to understand better how they measure their leaders and managers. How they salaries, offer bonuses and the support they give to their workforces. With Baby Boomers in retirement mode, the baton has shifted to Generation X who in turn have seen both sides of the narrative. But, are they able to change ?

Organisations today are susceptible to social equity and the environmental causes, but more importantly, organisations need to do the right thing on all fronts, especially with how they treat and support their employees, not just their executives. With change sweeping across the world after the covid 19 pandemic, it is clear that the strength of numbers rests with employees who have taken back ownership of their personal life. Organisations must change now, they can't just talk about it, or write slogans about, it must change now.

For those leaders, executives and managers that fear change, who play the finite game and allow ethical fading into their organisations, they will ultimately be moved on at some point in the future, but as far as leadership qualities go employees will no longer tolerate being treated as a number. Unfortunately, some of these old school programmed leaders will also take down perfectly good companies with them, some to the bitter end before they will change. Leaders must bring stewardship back to decision making and bring with them an infinite mindset so to add value to all organisations and the people who make them tick everyday. Walt Disney set a pretty good standard, everyone in his organisation wanted to work for him, his vision, his cause, and in tern Disney looked after all the people who made it all happen. For now, we need to see in leaders and managers that focus more on people management and the improvement of human skills.

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