Fixing the Game

Fixing the Game

Bubbles, Crashes, and What Capitalism Can Learn From the NFL

Book - 2011
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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 market--the business of designing, making, and selling products and services--with the expectations market--the 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 crisis--unless 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 market--and it presents the steps we must take now to do so.
Publisher: Boston, Mass. : Harvard Business Review Press, c2011.
ISBN: 9781422171646
Branch Call Number: 658.4 MARTI
Characteristics: vii, 251 p. : ill. ; 22 cm.

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STEVE CASBURN
Feb 18, 2016

For more than 30 years, corporations have taken it as gospel that their role is to maximize short-term shareholder value. Martin explains why this approach fails as a business strategy, noting that businesses such as Apple and Procter & Gamble which put service to their customers ahead of maximizing shareholder value actually provide more value to their shareholders.

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