economic re-start | February 07, 2012

Roger Martin's Crusade to Save Capitalism from Itself

For its cover story this month, Toronto Life profiles Roger Martin—Dean of the Rotman Business School—who explains why our economic system and corporate culture need a serious tune-up. “Just as Michael Pollan articulated how our food system is broken and Bill McKibben became the go-to guy on the dangers of climate change,” the magazine writes, “Martin is now the economy's village explainer." Though the head of a prestigious MBA program seems an unlikely figure to strike out against income inequality and bloated CEO compensation, Martin is up to the challenge. In the business world, he’s both an insider (a former high-profile consultant) and an outsider (in academia, he has published and taught his radical ideas with fearless abandon.)

In his latest book, Fixing the Game, Martin argues that business is "an agent of positive change," but that the current business climate is broken: basically, the move towards short-term stock-based compensation has created a system that encourages enormous risk, creates chronic volatility, and has single handedly caused every financial catastrophe since the 1970's. The issue is that C-level decision makers, influenced by boards, see their top priority as increasing a company's share price. They do not understand the larger problem, because they are acting as they believe they should.

From Toronto Life:

"Few career criminals think of themselves as criminals," [Martin] says. "They tell themselves that there was no victim, everyone else was doing it, etc. There's a system that enables them to tell themselves that they're doing the right thing. Do you call it unethical when your board says, 'Please improve expectations of future performance and don't do anything else, my boy'? The current system provides a built-in excuse for bad behaviour." Restraint isn't rewarded, greed is.

In Fixing the Game, Martin outlines his arguments for how the system can right itself: keep the real market (buying and selling goods and services) and the stock market separate, focus on keeping your customers happy, and constantly develop and tweak rules that discourage unfair advantages of any kind. Martin is one of today's most innovative, disruptive, and talked-about business thinkers who, instead of accepting the status quo, asks: how can we make capitalism better?

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