We now know that the shareholders and the financial industry won that battle for corporate control. In the business schools, the finance function emerged as top dog and the economists began to apply the teachings of their discipline to the firm via organizational economics (agency theory and transaction cost economics). The resulting shareholder value model of the firm has dominated for the last thirty years or so.
The business schools did not change their functional siloed structure (academic tenure makes it very difficult), but a new function called “leadership” emerged and began to grow very fast. If “management” was now all about maximizing shareholder value, then leadership became the dumping ground for all the human concerns in organizations, the aspects of our human nature that didn’t fit into the iron cage of the “rational-agent.” It might not yet be a rigorous discipline, the proponents of leadership studies argued, but at least it was “relevant”.
Author: David K. Hurst
Source: Ivey Business Journal
Subjects: Economics, Finance, Leadership, MBA Related