Page 127 - (DK) The Business Book

MAKING MONEY WORK 125

See also: Beware the yes-men 74–75 ■ Is money the motivator? 90–91 ■ Organizational culture 104–109 ■ Avoid
groupthink 114 ■ Play by the rules 120–23 ■ Accountability and governance 130–31

question corporate governance
mechanisms and executive pay. The
shareholders of Barclays Bank, for
example, were stirred into taking
action just before the bank’s 2012
AGM. They had discovered that in Leadership is a privilege
the previous year, profits had fallen to better the lives of others.
by 3 percent, shares had dropped by It is not an opportunity to
26 percent, but chief executive Bob satisfy personal greed.
Diamond was due to receive a bonus Mwai Kibaki
of $4.2 (£2.7) million and total pay in Former President of Kenya (1931–)
excess of $10 (£6.3) million.

Restricted ownership
In private limited companies, the
situation is simpler. Since share
ownership is restricted (often within
a single family), the directors and of family-owned and publicly owned
the shareholders are usually the companies in Spain found that
German mittelstand companies— same people. In any case, it is family-owned companies performed
such as Faber-Castell, a world-leading unusual for people to take advantage better, in terms of financial equity,
producer of pencils—are usually family- financially of those within their than nonfamily companies of the
owned. Directors of such firms are more own circle of family and friends. For same size in the same industry.
likely to focus on long-term performance.
example, the problem of perks before Countries such as the UK and US,
profits is rarely an issue in Germany, however, have a larger proportion
with the creation of large, public where the mittelstand (medium- of plcs than many other countries.
limited companies (plcs) that sized) companies—which are After decades of noninterference,
allowed senior management more mainly family companies—are the shareholders are once again
freedom to operate beyond effective dominant business model. A recent becoming interested in corporate
shareholder scrutiny. As long as the study of the different performances governance and gain. ■
company profits were satisfactory,
directors were free to conduct their Fewer perks, more profits
business functions as they saw fit.
However, if a business enterprise Several companies have taken were told that the choice was
comes to reflect the aims of its positive steps to eliminate perks between a reduction in travel
managers, will the business be as part of a cost-cutting strategy. expenses, or a cut in their
focused on profit maximization At the German company annual bonuses.
(for its owners, the shareholders) or T-systems International, an ICT Since the 2008 financial
on increasing the status, financial subsidiary of Deutsche Telekom downturn, there has been an
rewards, and power of its managers? AG, all workers must now fly in increase in the trend of
coach class, regardless of the organizations tightening their
Personal interests traveler’s position within the purse strings. Even the mighty
company, or the distance and entertainment company Walt
Some directors act opportunistically;
duration of their journey. The Disney is phasing out executive
they seem to be more interested
change from business- to car allowances. Cost cutting and
in personal gain than in the
economy-class travel is thought eliminating perks puts greater
company’s financial well-being.
to have saved T-systems $1.5 pressure on managers to boost
The banking crisis of 2008 led the million annually. Executives their company’s profitability.
shareholders of many companies to