Page 126 - (DK) The Business Book

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EXECUTIVE OFFICERS

MUST BE FREE

FROM AVARICE

PROFIT BEFORE PERKS

IN CONTEXT
Multiple shareholders
FOCUS In a public company, cannot run a company,
the shareholders
Equity and performance so they must employ
are the owners of executive officers to do
KEY DATES the company.
this for them.
1776 Adam Smith says that
managers will not watch over
a business with the same
vigilance as partners in a
private company would
watch over their own.
... so it is essential that It is not possible
1932 US professor Adolf managers can be trusted to oversee, in detail,
Berle and US economist to act in the interests of everything that these
the company, not
Gardiner Means coin the managers do…
themselves.
phrase “the separation of
ownership and control.”
1967 Canadian-American
economist J. K. Galbraith says
that shareholders no longer
control the organizations Executive officers must be free from avarice.
they legally own.
2012 Larry Ellison of US
computing corporation Oracle
Inc. becomes the world’s n an ideal business, directors Yet there is a risk that bosses can
highest-remunerated CEO, pursue the company’s be dazzled by the wealth generated
I objectives without undue around them, and work toward
when he receives $96.5 million
consideration for personal gain. boosting personal gain instead
in pay, shares, and perks.
Upon election to the board, they of the profits due to shareholders.
negotiate their salary and standard This situation, known as “the
perks, and from then on, their focus divorce of ownership and control,”
is on the success of the business. first arose in the late 19th century,