I remember when I was a poly sci undergrad, and all my friends who were not going to law school or academia but destined to go on and be suit types were all applying to McKinsey- it was kind of the gold standard for them all. They all wanted to work there, because it was the place and it seemed to have a sterling reputation. This was the early 90’s, and maybe they were hacks then, but that was the perception and I generally never paid enough attention to change my opinion about them. If you had asked me about them, I would have told you I really don’t know about them, but my general understanding is that they were reputable.
At any rate, if you have been following this ridiculous mess they seem to have gotten themselves into, you have to wonder how much money they were paid to just trash their reputation like this doing the bidding of their Galtian paymasters? I’ll never think of the same way, that is for sure. They’ve damaged their brand, and you can’t buy that back for a few coins.
Just horrible judgment. I wonder if they will ever come clean with the study internals, and I wonder if anyone will get fired?
*** Update ***
A quick perusal of Wikipedia shows me my perceptions about McKinsey were wrong. They look rotten to the core.
schrodinger's cat
John Cole@top
I have a solution, lets feed them to Tunch, then may be he will give us back our reply button.
This blog needs more Tunch, will help get us all in weekend mood.
RobNYNY1957
When I was in business school in the early 1980’s, I had a strategic managment class taught by a McKinsey partner. On the exam, the correct answer to about a quarter of the questions was “D. Hire a consulting firm to perform a strategic analysis.”
schrodinger's cat
On a more serious note, most of our problems can be traced back to the MBA/Business school mindset which pervades every institution and every strata of the society.
When did maximizing shareholder value become the golden standard of how institutions should be run? I am not sure running businesses in this way, where short-term profits are the be all and end all is a good thing for businesses either. The twin inputs of any productive economic activity are capital and labor, its seems like we have forgotten the labor side of the equation for too long.
Edited for clarity.
MattF
Yeah… Wikipedia correctly points to Enron as the paradigm case of McKinsey-fail. They had a vision for American business that turned out, in reality, to be mainly about the choices of fabric for the seats in your private jet and strippers.
joeyess
When I hear the words think tank or institute in association with right wing policy shops what always and immediately comes to mind is that their thinking has tanked or their group should be institutionalized, complete with straight jackets and rubber rooms.
martha
I’ve never worked for them, only with them. Their consultants are typical–they come in, suck the brains of the worker bees at a company, take what they learned and polish it up all shiny and bright so that it looks fresh and new, and give it back to the company as if it’s suddenly brilliant strategy/advice. CEOs buy this BS every time. Worker bees do not, but they have no say in exposing the elephant in the living room. The CEO pays the $2M bill and looks smart for hiring them. Then, he gets to blame McKinsey to the Board of Directors if something goes wrong.
joeyess
@schrodinger’s cat
Under President McKinley.
jomo
I’ve known a few McKinsey alumni and much of the corporate culture is true. Insanely hard working – particularly at the junior levels, ferociously competitive and absolutely top notch education and credentials. But when they walk into a workplace project – they have a rarified air about them – and tend to isolate themselves from what’s going on around them and operate from their ivory tower. In more cases than not they don’t actually contribute anything. They kind of exist to make management think they are doing something bold and leaderly.
Still given the rigor they usually apply to projects, this one seems horrifically shoddy and lazy.
Gin & Tonic
Since forever. What do you think the primary objectives of the Hudson’s Bay Company or the Dutch East India Company were? Altruism?
Menzies
I have one important question about that Wiki link:
Who the FUCK thought it’d be a good idea to place a management consulting firm in charge of telling people what to do with their schools?
schrodinger's cat
@9 Gin and Tonic
@ joyess
OK I agree that maximizing shareholder value has been the way that companies have been run forever but right now we want to run everything, even government that way not to speak of hospitals and universities, when did that start?
ETA: Companies like Xerox and IBM funded fundamental research back in the day, they funded projects that had longer time horizons now the focus seems to be on the next quarterly earnings report.
Alex S.
I rate McKinsey only marginally higher than rating agencies.
BR
All these places are rotten to the core. Fundamentally their job is to do whatever those paying them want them to do.
Gin & Tonic
And to add, since Cole used the word “Galtian”, there’s an interesting criminal case proceeding in NYC, somewhat underreported in my view, related to the demolition of the Deutsche Bank building that was damaged on 9/11. The demo was being managed by the “John Galt Corporation” which, true to form, prioritized speed over safety. Since there was asbestos involved, slow and safe was too slow and costly, and as a result a couple of years ago two NYC firefighters died in a fire in that building. The city is alleging that the John Galt Corp was criminally negligent.
Paul in KY
IMO, all those consulting services are parasites.
Villago Delenda Est
You know, “client confidentiality” sounds really good…it’s a way of saying “we’ve got your back”…but one of the serious problems is that it’s absolutely antithetical to a free market economic system, which demands transparency if it’s going to work the way it’s supposed to.
So, once again, it’s tradeoff time. This relates directly to the post about “libertarianism” below, which demonstrates that the problem with “liberty” is that there is more than one actor with it, and at some point, there will be conflict about whose “liberty” gets to prevail in that conflict. Which is why “liberty” winds up being constrained for some people to their eternal ire. Someone else’s “liberty” isn’t their problem, you know.
This is all basic stuff, but it gets overlooked because a lot of detail is assumed away when it should not be, because unless that detail is discussed and agreed upon, people wind up talking past one another.
f_space_that
Martha, is 100% correct. This was my exact experience with these dicks. Hanging’s too good for them.
Davis X. Machina
Education is slowly being over-run with their ilk. Once you’re identified as a non-performing school, and take the restructuring option, you get boatloads of federal money but you can’t spend in-district.
Gotta buy outside consultants, to deliver the data-driven, research-based, Federally blessed goods.
It’s all codification of the obvious, produced on a cost-plus basis in the absence of any meaningful oversight.
The only thing to do is make money out of it yourself — I’m long on every manufacturer of three-ring binders.
Whiskey Screams from a Guy With No Short-Term Memory
schrondinger’s cat: As someone above remarked, “forever”, but to be quite specific, the current mania for it that you see today is due to the proliferation of shareholder lawsuits against boards of directors back in the 1980s and 90s for dereliction of fiduciary duty. The awards were often in the billions.
So the standard was set: maximize profit at any cost for the current quarter, even if your actions would in the long term destroy the company, or land in court explaining why.
Villago Delenda Est
The MBA mentality, in a nut shell. Short term profit rules all. Short term returns are all that the spreadsheet commandos on Wall Street care about, to include fund managers. The long term is forgotten. THEN you have CEOs who talk about “shareholder value” when they actually mean “what can I loot from this bitch and get away with”.
Gin & Tonic
References, please?
shortstop
VDE:
This, this, this. And you can’t convince a “libertarian” that this is going on any more than you can get a “strict constructionist” to admit that he’s making personal judgment calls on the constitution or a fundamentalist to understand that she’s interpreting the bible.
martha
We currently have a couple of MBAs working for us who are so useless that I’m tempted to never hire one again…immediately toss anyone’s resume who has that degree on it. They do not understand how to manage projects, they cannot comprehend the concept of cash flow, and they cannot follow clients’ directions.
Really, what a worthless piece of paper. I hope all those schools are making good money selling them.
sock puppet
The thing is, this won’t have any impact at all on McKinsey’s reputation. In my job I interact a lot with biz school students and McKinsey is by far the top choice of those looking to go into consulting. They’ve managed to survive every scandal so far without so much as a dent in their bottom line or how they’re viewed in the corporate world. Its much the same as with Goldman Sachs. They’re bullet proof.
ChrisNYC
Deleted for stupidity.
liberal
How surprising can that be?
AFAICT just like investment banking, the hours are fairly long. And just like investment banking, let’s be honest: is the field really all that interesting? No. What do we conclude from that? That people are in it just for the money. And what do we conclude from that? That corruption is inevitable.
liberal
@ schrodinger’s cat:
Buzzt! Wrong! There are three inputs to economic activity: capital, labor, and land.
Davis X. Machina
@Gin & Tonic
All of these firms are doing something….
Villago Delenda Est
The other problem with the MBA mentality is that they’re trained on static models and the real world is dynamic.
So they have no clue as to how to function in a dynamic situation…the damn targets keep moving on them!
schrodinger's cat
#26 Liberal
I am considering land as a long term asset, hence a part of the capital.
powderfinger
Consulting is the biggest bullshit con in American business. I studied industrial engineering (the science of trying to make things more efficient) and consulting firms like McKinsey were what my classmates aspired to. I worked in healthcare for two years doing essentially the same job as what high-priced consulting firms like McKinsey do, only my unit was internal to the healthcare system. It’s just all bullshit. We worked our asses off, and I’m sure they do to, but I never felt like any of the work we did added any value whatsoever to our clients.
gene108
I’m currently doing an MBA. I don’t see the mindset coming out of business schools per se (or maybe I’m not learning enough). The people, who teach at B-schools are academics. They aren’t C-level executives, who make decisions. I think that mindset is more a product of the corporate cultures business school grads get pushed into than anything else.
Is there another tangible measure to evaluate business performance? Maximizing shareholder value is an imperfect measuring devise for evualating business performance, but I don’t know how you come up with other measurable metrics.
In a global economy, capital can move freely around the world. Labor conditions for many places in the world are thankfully improving, versus what workers in those countries had to deal with a generation or two ago.
Of course, as capital moves around the world, some places will get the short end of the stick.
Labor, unfortunately, isn’t as mobile. If capital investments move out of your town, the labor market in that town suffers.
I really don’t know how to insulate American workers from this trend. In the past, powerful nations shat on less powerful nations, to make sure the people in the powerful nations were fat and happy. I don’t see that model as a good thing.
I think some of the capital movement to less developed nations as a correction for a couple of centuries, during the colonial era, where capital flowed out of now Third World nations to First World nations.
Probably some changes in the tax code, to limit the hoarding of wealth at the top of the economic ladder and greater investment infrastructure – schools, teachers, roads, trains, etc. – would offset the hit to the American worker, but we aren’t going to back to the 1950’s and 1960’s style levels of job security.
Culture of Truth
Trust us, we’re experts!
Villago Delenda Est
“Stock, labor, rent.”
This is classic stuff.
The most important of these is labor, without which the other two are nothing.
Lawnguylander
Before I got into my current line of work, I was in the environmental consulting business and had the misfortune of having to oversee the work of the John Galt Corporation’s predecessor company, Safeway, and had to deal with one of the guys charged in the Deutsche Bank fire nearly every day. The money was great but it was because of my disgust for him and his company that I had to find a different line of work. I was not shocked to see the guy in handcuffs in the NY Daily News. I just wish it had happened 15 years earlier and for less immediately deadly crimes. Maybe those firemen would still be alive. But they probably would have just found someone else to oversee the cutting of corners and standpipes and implementing of work practices that relied on the invisible hand of the free market to provide water to put out fires and gather up any ambient asbestos that could become a problem.
RobNYNY1957
Martha:
That’s because very little of that sort of thing is taught in MBA school. I got an MBA in finance, and there was not a single world about how to make different financing choices in the real world. We were encouraged to lever to the maximum. And we never even heard of LIBOR. In two years of MBA school (and a top one), I had exactly four classes that were useful. Three of them could have been had at any local community college (financial accounting, managerial accounting, and basic finance). The other one was good mostly because of an excellent teacher — he came as close as anyone I have ever met to being able to teach common sense. I don’t recall any cash management class (I would have taken it), and they don’t take directions because it has been pounded into their heads that they are leaders, not followers. I did have a project managment class, but it did not involve any actual projects. I did learn important things like “if it takes three weeks to get something you need, order it three weeks before you need it, but not any sooner or else you will have cash tied up in inventory, even if the project has to grind to a halt if it is a day late.”
Villago Delenda Est
Cripes.
I was trained to be an Army Officer, and one of the things WE learned was that you can’t be a good leader unless you can also be a good follower.
Because there is always someone higher up the hierarchy than you, you see.
Culture of Truth
“rock, paper, scissors”
jonas
I’m no economic historian, but I wonder how much of this focus on short-term earnings and “shareholder value” has to do with the huge growth in the 80s and 90s of massive mutual funds and the shift from traditional pensions to 401ks and IRAs for most Americans’ retirement savings. The funds wanted to compete to sell themselves as having the biggest growth numbers and with their huge buying power, could put pressure on corporate boards to meet certain targets or risk the wrath of “Wall Street” (= huge fund managers).
The “share holders” demanding increasing “value” are, in fact, us. The people being screwed by corporate managers seeking to maximize short-term gains for their stock holders and their financial advisers are, in fact, us.
Cat
@23 Marth
Hand over fist. If you are a useless git and want a middle management position you get a MBA. You if can’t afford or can’t get into the MBA program you get a PMP, Project Management Professional, certification.
RobNYNY1957
A friend of mine used to work as a transactional lawyer for AT&T, and about once a year consultants would be called in to reorganize his division, a different firm each time. One time he was put on a team and had no boss (but he did have a “coach” who could tell him what to do, set his salary and could fire him), and other time he was part of a “matrix’ and everyone was his boss. The last straw for him was when a freshly minted MBA consultant asked my friend if it could be taken as given that large dollar deals had more complex paperwork and negotiations than small dollar deals. My friend replied something like, “I’m really sorry you asked that, since it shows you don’t know shit about anything. Big companies buy from AT&T every year, even every few months, and the transactions are routine, not much more than a checklist. Small companies do it once a decade, and their phone system is the second most important thing to them after real estate. What’s worse is that they use their regular business counsel who don’t know anything about telecoms, and we have to reinvent the wheel with them again and again.”
Chris
@ gene108:
Be nice if unions and regulatory institutions could be as globalized as multinational corporations, wouldn’t it?
schrodinger's cat
They may be academics that does not necessarily make them disinterested parties, many top business school professors consult on the side. There are conflicts of interests that you may not know about. What about their research work, the conclusions they draw, do they ever go against moneyed interests? I am not saying that all business school professors are corrupt but their theories are based on shaky premises and usually comfort the comfortable.
For example, check out the current mania about budget deficits, who do you think benefits from it?
That is a policy choice not a natural law like gravity.
You can increase share prices by buying back shares for example, how is that economically productive.
The whole movement of paying CEOs in stock options springs from Agency Theory of Jensen (from HBS), where if you make employees owners they will make decisions that are beneficial for the company, hasn’t quite worked out that way has it?
BTW why is a stock price a good metric of the economic health of the company, especially if it is much much greater than the book value? In the lead up to the financial crisis the stocks of big banks were quite high, so was the stock price a true indication of the health of those banks?
Viva BrisVegas
I disagree, the CEOs are the parasites. If we are going for a biological metaphor it’s more like the relationship between ants and aphids.
The aphids (CEOs) settle on a plant (corporation) and begin to suck out all of its juices (loot). The ants (McKinsey clones) come along and suck up the sweet ooze (fees) that the aphid excretes from its ass. In return the ants protect the aphids from predators (shareholders, boards and regulators).
It’s a neat little ecosystem where everybody benefits except the plant. But there’s always another plant just a short hop away.
RobNYNY1957
Oh, a couple more things we learned in business ethics class (it was actually sort of the opposite) were that (1) if you can pollute, you must pollute, because doing otherwise is making your shareholders bear costs that could be shifted to someone else, and (2) there is nothing a company could do that was so terrible that you are morally or ethically obligated to quit your job. Those were the only correct answers on the exam, and any deviation would get you less than an A. If you proposed a different answer, but then went with the right answer, you got a B for suggesting that the right answer might not be right. I got my only C in MBA school in that class.
jinxtigr
Google: “Don’t be evil”
McKinsey: “…well, that’s special! Nice. We have nothing to talk about. Enjoy obscurity!”
Google: “…?”
McKinsey: “Collectivist wankers ;P”
jl
I think ‘McKinsey’s management consulting looks incompetent to the core’, is a better way to put it.
From my experience, calling in generalised ‘management consultant’ expertise usually happens when company management does not know what to do, or has no guts, and needs to shift blame for some kind of sh*t that will hit, or has hit, the fan. Other than reducing quality of service to customers, and reducing real compensation of workers, or breaking promises to workers, their advice usually is essentially random bright ideas, seems to me.
The health analysis unit of McKinsey has done excellent work. Just like the economic analysis unit of Goldman Sachs does excellent work (which is effectively Keynesian, no matter how they hide under fancy currently acceptable modelling it on occasion to maintain prestige).
The communists, Stiglitz and Krugman, have cited both McKinsey health analysis unit, and Goldman Sachs economic analysis. Kenneth Arrow, the economist whose ideas on health care economics lead to oppressive murderous socialist statist health care systems where people live longer, like the system better, and cost less than the US system, has supervised some McKinsey health economics studies.
Much of the evidence for funny business in this McKinsey study came from insiders in the health analysis unit blowing the whistle.
Waving the reputation of the whole company to dismiss research results, is just as bad as using a big name to endorse a study without any idea of what they did (which is what the GOP and the media are doing).
There is no substitute for showing your work, and that is what we need in this case.
I would say that if McKinsey does not show their work, and allows it to be used in policy debates, then their reputation should take a big hit. It would be unfair if that tarnished the good work of many of their high quality research units that do show their work. But the McKinsey corporate brass has it in their power to do one or the other. Unfortunately I don’t have much confidence that it will do so.
Within companies, money talks and BS walks is a big theme, and big bucks from sleazy management consulting usually beats out chump change from research grants.
jl
Moderation, let’s look for the naughty word:
I think ‘McKinsey’s management consulting looks incompetent to the core’, is a better way to put it.
From my experience, calling in generalised ‘management consultant’ expertise usually happens when company management does not know what to do, or has no guts, and needs to shift blame for some kind of sh*t that will hit, or has hit, the fan. Other than reducing quality of service to customers, and reducing real compensation of workers, or breaking promises to workers, their advice usually is essentially random bright ideas, seems to me.
The health analysis unit of McKinsey has done excellent work. Just like the economic analysis unit of Goldman Sachs does excellent work (which is effectively Keynesian, no matter how they hide under fancy currently acceptable modelling it on occasion to maintain prestige).
The communists, Stiglitz and Krugman, have cited both McKinsey health analysis unit, and Goldman Sachs economic analysis. Kenneth Arrow, the economist whose ideas on health care economics lead to oppressive murderous s * c * * l * s t statist health care systems where people live longer, like the system better, and cost less than the US system, has supervised some McKinsey health economics studies.
Much of the evidence for funny business in this McKinsey study came from insiders in the health analysis unit blowing the whistle.
Waving the reputation of the whole company to dismiss research results, is just as bad as using a big name to endorse a study without any idea of what they did (which is what the GOP and the media are doing).
There is no substitute for showing your work, and that is what we need in this case.
I would say that if McKinsey does not show their work, and allows it to be used in policy debates, then their reputation should take a big hit. It would be unfair if that tarnished the good work of many of their high quality research units that do show their work. But the McKinsey corporate brass has it in their power to do one or the other. Unfortunately I don’t have much confidence that it will do so.
Within companies, money talks and BS walks is a big theme, and big bucks from sleazy management consulting usually beats out chump change from research grants.
RobNYNY1957
There is an inherent conflict between generalized consultants and specialized consultants. As has been pointed out above, generealized consultants come in and interview the workers to figure out the industry, the problems and proposals. They may bring a power to sythesize information and implement proposals, but they don’t usually bring much information or experience about a specific company or industry. They problem with specialized consulting firms is that by selecting the firm, you have selected the advice they are going to give you. They have a hammer, and everything looks like a nail. A marketing firm is going to give you a marketing solution.
jinxtigr
Also, check out Ogilvy “On Advertising” for a refreshing counterbalance to all this evil bullshit. That guy was a huge success, in part by seeing that all negotiations have two sides (not even counting the grunts doing the work, whom he also remembered).
He was kind of a Gordon Ramsey type ad exec, demanding everything from his people and always more from himself, he’d fire accounts if they were impossible to work with or if he didn’t believe in the product, he had grave misgivings about advertising getting involved in politics, and thought hard about the ethical considerations of what he did, while remaining convinced that ‘speaking well of good stuff’ was a totally admirable vocation.
Always did his best, as a matter of pride, and assumed that this pride and conviction to his own values would bring all the success (well MOST) that he wanted. It was true, and the guy became a canonical figure among ad execs.
You would not catch him teaching people that they were obliged to create as much wreckage and do as much damage as they possibly could get away with, for short-term gains. That is just fucking retarded and brings down the whole market with it. You get to a state where everything sucks and it’s expected and undifferentiated.
Kinda like how MBAs of this ilk can be expected to suck and not help your business put down roots or build loyalty in any way at all.
In a world where everybody sucks, this isn’t a handicap because the other guy is just as bad, or you expect him to be.
But breaking that mold becomes newsworthy and worth talking about, and there is no defense against a superior competitor when you’ve perfected sucking in a world of suck :)
Commenting at Balloon Juice since 1937
Ha ha ha ha ha ….
jl
My cynicism about financial and economic consulting firms arises not from reflexive lefty soft headed ideology, but from the fact that I have worked for several of them.
Their business model is to have a fairly standardized ‘consulting research’ product which they crank out. They say that they put really bright people and brainstorm and are creative and think out of the box.
But, hey, it’s a business and you gotta think about how to maximize profits. In this kind of biz, the volume will never be all that high, so you gotta make it by increasing margin. How do you do that?
Well, you have a standardized consulting product. Basically, you price it on what it would cost if you really did what you said you did, but everything is run off a standardized analysis. So, basically, you charge them for month, but can churn out the analysis in two weeks.
For real research, you have to work very hard to produce the product you promised in the time you estimated it would take. Because, finding the unexpected and having to make adjustments as you go, is the norm.
There are always many units in these big companies. The honest research people are usually the foolish losers.
The only really honest, truly egghead and truly research oriented group that had prestige because it brought in cash in any consulting firm I worked for was a group that fixed problems with stock markets and derivatives exchanges. And that was only because the competition to game an exchanges rules kept them very honest and on their toes. And they could bring in big money because the exchange risked very large losses when their systems could be gamed.
But mostly, real research has low prestige in these firms, even if they decide to do it for various reasons.
PWL
Don’t worry–like any wingnut institution–like Billy Kristol–they will rise from the ashes of their own incompetence and dishonesty to become even more profitable and respected by the “Right people” than ever before…
jprfrog
I remember that GWB got an MBA from Harvard, no less. I’d think they might want to soft-pedal that.
As for McKinsey, my employers (the Boston Symphony) accepted a free consult from them to look at why our administration was so dysfunctional. (Any of us in the orchestra could have told them: we had a Music Director and Executive Director who hated each other,which as a member of the Players’ Committee I observed firsthand. The aforesaid Music Director was unable to make decisions and in any case did not learn in 30 years to express himself clearly in English. Knowing Japanese was not a job requirement for us, after all.)
The McKinsey folks came in and interviewed more than a hundred of us. (They could have learned all they needed to know from the Stage Manager, who as in all such enterprises knew everything, including all the dirty little secrets.) After several weeks of “research” and more of consulting with each other, they produced a report, the gist of which they presented to us in Power-Point demo. I left after about 20 minutes, seeing that all they had was buzzwords and empty jargon. It boiled down to “better communication”! The problem was not communication in the abstract, but what was being communicated.
Not a thing changed, of course. That was not surprising…even had they been more than the hacks they were, I doubt that any of them could understand the structure of an American symphony orchestra, which doesn’t fit any of their B-school models. The BSO got what it paid for: zilch.
When my son graduated from Columbia Law, he applied to McKinsey for a job. They rejected him, which is a very good thing, as he is now (10 years later) an Executive Director in the legal department of UBS. He would probably have been too no-BS for them…after all, he didn’t go to B-school (which should be BS-school, IMO)
Felanius Kootea (formerly Salt and freshly ground black people)
I doubt that this gets taught in b-school: the surprising truth about what motivates us. The whole open source movement, the rise of linux, etc., must be a source of bafflement.
Paul in KY
@Viva BrisVegas: I like your explanation. It is not much different from mine, but more nuanced.
liberal
@ schrodinger’s cat
Just because land can be legally owned doesn’t make it capital.
Similarly, just because once upon a time slaves could be owned didn’t make them capital.
liberal
@ schrodinger’s cat:
Right. Most important evidence: if they’re just “disinterested” academics, why aren’t their university salaries on par with (say) faculty in literature and philosophy departments?
burnspbesq
Was that a deliberate Toad the Wet Sprocket reference, or just a happy accident?
Everything anyone needs to know about McKinsey et al has been neatly summarized in Dilbert.
wazmo
Why anybody brings in a consultant to tell them what they already know is beyond me.
burnspbesq
@wazmo:
Sometimes the board needs to hear it from somebody external (who is, rightly or wrongly, presumed to be objective).
gene108
The problem isn’t Agency Theory. The problem is that when companies started offering stock options as compensation, there was no method to accurately account for it.
The governing body that sets accounting standards, FASB, wanted to treat them like other compensation and have companies expense it.
Companies lobbied Congress to keep stock options off the income statement. The companies mostly won. Congress leaned on FASB to change their opinion of the treatment of stock options. Stock options just got a footnote disclosure, but weren’t treated as an expense.
This is a bigger problem than the Agency Theory.
Professors in every discipline under the sun consult on the side. Geologists, Engineers, etc. all have done some sort of consultation for the private sector.
I don’t see the point in singling out business school professors.
My only point is, I think the problem with business ethics resides more with corporate culture than with academia, i.e. business schools.
Yes, globalization has been a policy choice. It is a good policy choice.
It is better than the alternatives of mercantilism, where nations dumped goods onto other nations and screwed up their economies, because they wouldn’t allow those nations to export their goods and the Cold War era economic blocks, with limited trade.
Is there another quantifiable metric you would suggest? I don’t know much about the research on company valuations.
I do know ideas, like what Al Gore, Jr. floated in his early 1990’s book, Earth in the Balance, about assigning costs for the use of communal resources – air, water, etc. – has not caught on and I’m sure what research has gone into figuring out how to assigning quantifiable values for common resource use.
As I posted above, shareholder value is an imperfect system. I’m not an expert in the field of valuing companies. I don’t know another method that can be quantified relatively objectively to allow an outside party to measure the health of a company.
Any suggestions to other methods are welcome.
Unions maybe. Regulatory institutions starts getting into issues of national sovereignty. There are some regulatory rules that are multi-national, I think, because of the WTO rules, but I don’t know how far they extend to create global standards.
EDIT: I think the EU has some transnational regulatory standards. I’m not sure how those are working out in agriculture and other areas.
gene108
To expand a bit.
MBA programs in the U.S. typically require some work experience, before they’ll admit you.
You usually have a bunch of people in their mid-to-late 20’s and early 30’s, with 5-10 years of experience getting MBA’s. There mindset of what they expect often comes from the corporate culture they have worked in before going to business school.
Just an observation from what I can deduce from discussions with my classmates.
catclub
The Consulting demotivator:
“If you are not a part of the solution, there’s good money to be made prolonging the problem.”
I also like the one on leadership:
“Leaders are like eagles, there aren’t many of either around here.”
ed drone
Consultant: A man who asks you for a number, then sells it back to you.
Ed
jprfrog
Gene
Isn’t the core of the problem that the question is wrong? It is not ‘what is the measure of what is best for companies?” but “what is best for human beings?”. The link offered by #55 is a real eye-opener; maybe I think so because it aligns exactly with my personal experience. But it’s worth a look, and a lot of thought.
Hewer of Wood, Drawer of Water
gene108 @ 32
At the school where I did my MBA (a fairly prominent one in Canada), most if not all of the faculty also had consulting practices on the side. The notion that anything other than short-term value was important was, shall we say, “discouraged” and your marks would certainly suffer if you were to suggest such a thing
gene108
Hewer of Wood, I’m going part time, so maybe I don’t get the full effect of that mindset.
Douglas
Actually, sometimes the board just needs to be able to point to someone and go “it was their idea”, or “we’re doing soemthing about it – we asked these guys to consult”.
schrodinger's cat
Gene:
The entire business school mindset is based on the Chicago School economics or neoclassical economics (Milton Friedman, Robert Lucas and others) which gained prominence in the Reagan era. What they teach in Business Schools is not science it is an ideology disguised as a science.
Academics in business and economics have provided cover for the most naked “greed is good policies dressed up as objective science”.
BTW I have an MBA and am in PhD program in Finance and I have realized that the emperor has no clothes and I am not sure whether I want to continue and add to this charade.
schrodinger's cat
Consulting is not the problem, it is peddling policies that benefit your clients as objective research.
Just because you can measure something easily does not make it a good metric.
For whom? Though the productivity of American workers has increased in the last 30 years the wages have remained stagnant and income inequality has increased. Globalization has been very good for the rentier class.
burnspbesq
@schrodinger’s cat:
True, but you don’t get to ignore the fact that globalization has dramatically enhanced the purchasing power of every American wage earner. You can credibly say that globalization has been a mixed blessing. If you say it’s been unambiguously bad for the average American, you’ve left economics and are into ideology.
Also too, as I’m sure you well know, correlation is not causation.
jinxtigr
@burnspbesq: you’re not correcting for advancements in technology. Doesn’t matter if 2011 guy can wield a ‘tricorder’ that would’ve been unthinkably sci-fi in 1971, if 2011 guy is working two jobs just to be able to afford little better than animal feed for himself and his family. Some of the trends that have happened are unambiguously bad, and some of the things your average homeless person can do today are unambiguously amazing compared to 1971 or 1911.
Globalization is only unambiguously bad in that it has allowed large centers of economic and social power- notably, huge corporations- to attack their enemies with previously impossible force. Some of those enemies are ‘normal society, healthy eating, local jobs, preservation of a social structure that can support a middle class’.
If these corporations (or indeed governments, where governments are doing it) weren’t pursuing their own growth at the expense of the host society, then globalization would be nifty keen. Hell, man, I pay my mortgage year in and year out by sales of software overseas. I am an American business and exporter of digital goods, and bring money into the country. Not twenty years ago, I couldn’t possibly have done that without a whole manufacturing infrastructure. I am using globalization to bring money from the rest of the world and, often, spend it locally.
Doesn’t change the fact that globalization has done much more harm than good. I now depend upon it because the society around me locally can no longer support my work. There’s a lot of people who can’t do what I do…
schrodinger's cat
I agree with that. It has been good for the middle classes in India too. Globalization is not all bad neither is capitalism, but neither are they the solution to all our problems. We need capitalism with a strong regulatory infrastructure. A free for all without a social safety net, weak regulations and extremely low taxes only benefits those on top.
mclaren
It’s poli sci, John. Not poly.
schrodinger's cat
Giving up well paying jobs with benefits to be able to buy cheap stuff at Walmart and the latest electronic gadgets is not much of a bargain if you ask me.
Ruckus
https://balloon-juice.com/2011/06/17/throw-it-all-away/#comment-2634862
The problem is not maximizing shareholder profits. It is maximizing Short Term shareholder profits above all else.
What those big companies used to do was look 20-50 yrs in the future, as best they could and create products/services that would at least attempt to last. Now it’s ALL about the next quarterly statement, the stock quote, the bonuses. That’s the MBA mindset/training in action.
The end result is higher temporary profits with little to no long term outlook. A result that can easily end the company. But not to worry IGMFU.
It’s as if corporate rapture is just around the corner and we have to get out all we can, while we can so that we look better come judgement.