The Limits of Management by Objectives

Many companies today experience a critical strategic contradiction. Their corporate purpose and values have evolved into what could be described as a humanistic vision while, at the same time, their management systems, mostly built around management by objectives (MBO), are designed to maximize shareholder value. Everything—customer service, talent development, even their philanthropy—is a means to increase profit. The problem is not about the objectives themselves, but rather their widespread misuse through the MBO system. Judging by the results of four decades of research, MBO has not been able to bring employees’ full potential into play. In this chapter, we analyze the limits of management by objectives and their consequences at organizational and personal levels.

Leadership transformation reading list: insider guides to customer-centricity, Agile management and visionary innovation

Purpose The transition from shareholder value primacy to customer-centricity is a multi-dimensional challenge for leaders. Design/methodology/approach Five books that provide guidance.by insiders are suggested. Findings Nadella confronted culture on day one and announced that from then on, the culture would be one of collaboration and finding mutually profitable solutions. Instead of an “us vs. them,” paradigm, it would be “us with them.”

The Pandemic and Shareholder Value

Shareholder value has driven corporate governance in North America for over a century. In the wake of significant financial crises and growing inequalities, corporate America decided in 2019 to embrace a more egalitarian model, in which all stakeholders matter equally. The brutal pandemic that wreaked havoc in the first half of 2020 exposed a startling disconnect between the real economy and the stock market. This disconnect is due to a gap between explicit and implicit corporate governance. While officially corporate America wants to convert to a new doctrine, the pandemic has shown that shareholder capitalism has remained the default model. Good intentions and official declarations are not enough in a system that has been specifically designed to serve the shareholders. If stakeholder capitalism is to succeed, it needs a clear normative content and perhaps a more radical reform of institutions and regulation.

CEO Compensation in Korea: Is It Different Than in the US? A Comparison between Korean Non-Life Insurance Firms and US Property-Liability Insurance Firms

This study investigates the level, structure, and pay-for-performance relationship of CEO compensation in Korean non-life insurance companies. We find that seniority plays an important role in setting CEO compensation practices and that performance-based pay, such as bonus, is more effective than base salary in enhancing shareholder value for Korean non-life insurers. Unlike previous studies that show that international differences in executive pay have been diminished considerably since the 2000s, our evidence shows that there is a remarkable difference in CEO compensation between Korean non-life insurers and U.S. property-liability insurers. Furthermore, we provide evidence that the pay-performance relationship is weaker in Korean non-life insurance companies relative to US counterparts, suggesting that it is necessary for Korean non-life insurers to tie performance-based compensation more closely to shareholder value in the design of CEO compensation.