Philip Whiteley's Blog

December 3, 2010

The death of cynicism. Well, hopefully

Filed under: Uncategorized — felipewh @ 10:28 am

It is worth reading a fascinating article by the late Sumantra Ghoshal from 2005, anticipating the risks that culminated in the credit crisis. His observations are particularly acute on the actual contributions of different stakeholders. He makes the same point as Bob Garratt and Gordon Pearson that stockholders do not own the company – they own shares in the company and have limited liability. Especially insightful is the point that the human capital is both more deeply involved and more crucial to success – so the cult of looking after the interests only of part-time stockholders is illogical and skewed.

There is much on the pessimistic, indeed cynical, view of human nature in agency theory. Ghoshal traces this back to philosophers I’m only dimly aware of, if I’m honest. I think there’s also a contribution from literature and popular culture, as explored in Meet the New Boss, which describes how Ebenezer Scrooge’s treatment of Bob Cratchit is the MBA in microcosm.

And there’s maybe an even more fundamental observation that a non-academic like myself can dare to blurt out. The orthodoxy of recent years has been to pretend that organisations don’t even consist of people! Accounting convention describes human capital as intangible and the accounts as tangible. In real life, the reverse is true. People exist; it is the accounts that are conceptual.

Reducing people to the status of ‘resources’ was always unethical. But it’s completely bonkers from a business point of view, to use unacademic language. Given Unilever’s historic break with the bonkers theory, and Moody’s introducing talent management indicators, we may be on the brink of an historic turning point. But political extremism is threat to this – just as in the 1930s.

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