The financial crisis continues to bring out the contradictions inherent in the shareholder-centric corporate governance model. This much, but not much more, is evident in a Knowledge@Wharton
roundup of remarks on the subject from various experts, most of them Wharton professors.
Summing up rather freely, here is the central paradox: CEOs must be responsive to shareholders. But they mustn't be guilty of the kind of short-term thinking that led General Motors Corp. to make too many SUVs and Citigroup Inc. to dive too deeply into structured finance.
What about the fact that there are different kinds of shareholders, and many of them
demand short-term thinking?
It's not fully acknowledged in the Wharton piece, but it is the subject of an i
mportant article in Directorship magazine. In it, corp gov guru Ira Milstein (writing with former Bankers Trust chairman George Vojta) actually takes the radical step of embracing a stakeholder model -- a move that, as Robert Teitelman
pointed out on Dealscape a while back, has its own difficulties. -
Kenneth Klee
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