Incentivize the Long Term
Creating an organizational culture focused on the right goals and outcomes requires a combination of information and regulation, as well as leadership. In a competitive world, the rules must reinforce solid long-term thinking so that balancing risk and reward is not seen as merely a test of the "great leader," but is expected behavior for all employees.
Of course, a wayward leader like Bernie Madoff can always derail the best structures and oversight, but a whole culture, led by Wall Street, demanding that, for example, AT&T keep pace with a ponzi-risky-WorldCom/Enron business model regardless of the long-term risks is lethal.
I just returned from China where a major entrepreneur talked of his company's success as a result of how it had ordered its priorities:
So let us create a greater financial and regulatory framework that reduces risk, values assets realistically, and incentivizes long-term over short-term profits. Let's have a compensation system that rewards long-term success. Let's have institutional investors take a more active role in setting the long-term framework and allow for the democratic nomination and election of the boards of directors.
Let's end the shareholder/share-price-only mentality and have it be more balanced with rewards to customers and employees. And let's have leaders and boards of directors who are more diverse in their interests and background and who understand that leadership involves far more than picking the right CEOs and gloriously compensating them.
Posted by: jfv123 | September 15, 2009 11:48 AM
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