American capitalism is in dire straits, caught in a perilous pattern of increasing volatility, decreasing investor returns, and ongoing bad behavior by executives. And it’s getting worse. Since the turn of the twenty-first century, we’ve seen two massive value-destroying market meltdowns and a string of ethics breaches, including accounting scandals, options-backdating schemes, and the subprime mortgage debacle.
Just what is going on here? Is it the inevitable decline of the American economy? Is it the new normal in a technology-enabled global marketplace? Or is it possible that the very theories we’ve embraced to underpin our capital markets are actually producing these crises?
In Fixing the Game , Roger Martin reveals the culprit behind the sorry state of American capitalism: our deep and abiding commitment to the idea that the purpose of the firm is to maximize shareholder value. This theory has led to a massive growth in stock-based compensation for executives and, through this, to a naive and wrongheaded linking of the real marketthe business of designing, making, and selling products and serviceswith the expectations marketthe business of trading stocks, options, and complex derivatives. Martin shows how this tight coupling has been engineered and lays out its results: a single-minded focus on the expectations market that will continue driving us from crisis to crisisunless we act now.
Using the National Football League as his primary example, Martin illustrates that it is possible to take a much more thoughtful and effective approach than we now do to the intersection of the real and the expectations markets and to governance in general in the capital markets. Martin shows how we can act to end the destructive cycle, including:
Restructuring executive compensation to focus entirely on the real market, not the expectations market
Rethinking the meaning of board governance and role of board members
Reining in the power of hedge funds and monopoly pension funds
Concise, hard-hitting, and entertaining, Fixing the Game advocates seizing American capitalism from the jaws of the expectations market and planting it firmly in the real marketand it presents the steps we must take now to do so.
|Publisher:||Harvard Business Review Press|
|Product dimensions:||5.80(w) x 8.30(h) x 1.10(d)|
About the Author
Roger Martin is dean of the Rotman School of Management at the University of Toronto and a professor of strategic management at the school. He authored The Responsibility Virus , The Opposable Mind , The Design of Business and many articles in leading business publications including Harvard Business Review , BusinessWeek , Fast Company , and Barron's.
Most Helpful Customer Reviews
Roger Martin (Dean, Rotman School of Management, The University of Toronto) has written an insightful and easily understood description of the problems with contemporary American capitalism. Martin's book is a must read for anyone who cares about the well-being of the American economic system and how Wall Street/hedge funds have virtually corrupted true American capitalism. Using management of the National Football League as a paradigm, Dean Martin describes the Agency Theory problems and suggest how the problems could be corrected. The central theme wending through the book is the notion of American companies not being focused on the real market of producing goods and services to satisfy customer needs and wants, but concentrating their energy on the expectation market of Wall Street/hedge funds and "maximizing" shareholder value. Martin, highlighting the threat to American capitalism from the expectation market, states: "... a real market orientation creates individual and societal good, while an expectations orientation creates a downward spiral that threatens both individual well-being and the health of our economy. American capitalism is in danger, and the danger stems directly from the way we have linked the real world to the expectations world [i.e., Wall Street and hedge fund casinos], amplifying the influence of the expectations market on the real market."
Outstanding book from the Dean of Business at U of Toronto. Roger Martin nails the root causes of our financial system's breakdowns and what to do about it. Easy to follow, brilliantly conceived and a must read for any senior business leader and government leader.
Roger L. Martin, dean of the University of Toronto’s Rotman School of Management and a life-long sports enthusiast, believes the 2008 mortgage meltdown was only the most recent crisis in the chronically ill US economy and that another setback is inevitable unless American business leaders change their approach. He traces the US economy’s problems to the mid-1970s, when corporate philosophy shifted from serving consumers to placating shareholders. He calls for a return to the old business model of paying executives based on real achievement not on meeting or missing projections. He cites the US National Football League (pre-referee strike) as the perfect illustration of how well a real-rewards model can work if executives put their customers first. “It isn’t about how profitable a company wants to be,” Martin says, “It is about in what way the company becomes profitable.” getAbstract believes that his playbook can help corporations get back in the game.
If you ever wondered exactly what seemed wrong with capitalism these days, why so many companies made so much money without actually making anything, this is the book for you.