Development Revisited: A Sociological and Managerial Analysis–Part 11

Prologue

It is an undeniable fact that economic development is a function of management. Without effective management, then, no economy can truly develop. In this sixth and final part (eleventh in all) of examining economic development from the perspective of the Value Pyramid of Management (VPM) we turn attention to the shareholder. Our goal is to analyse the extent to which shareholder interests has impacted economic development.

Over the centuries, management has largely been shaped by the interests of the capital owner. Shareholder value maximization, therefore, has been the pursuit of management. This has often led to trampling other more important stakeholders in management.

The VPM, propounded by this author, seeks to correct the erroneous view that has been held over the years by management and which has significantly held back true development. It holds that, rather than the shareholder being at the top of the pyramid as the most critical and important stakeholder, his place is really at the bottom!

At the apex, we have nature, followed by society/humanity. Next is human resource which also precedes customer/supplier. Management is next and as mentioned earlier, the shareholder is at the bottom.

                     Fig.1.The Value Pyramid of Management (VPM)

Relative Importance of the Shareholder

Capital is very crucial for the start-up of many businesses. Yet coming by capital, especially in terms of money, has always been difficult. Having investors who buy into the company by way of shares is thus quite helpful. Through their investments, it becomes possible for the business to acquire the necessary resources to operate and create employment. It is this function of capital, among other things, that has led to giving shareholder interests primacy in management.

Self-Destruction

The role of investors and their relative importance notwithstanding, placing the shareholder’s interest foremost in management and economics has really proved to be self-destructive as time has borne out. Here are some ways in which that has been the case:

King Money. Ever since money was discovered, it has ruled man. Our thoughts, decisions, and actions have all been mostly decided by money—what to do with one’s life, the kind of education and career to pursue, whom to marry, whom to love and whom to hate are just but a few of those decisions that most of us make based on money.

Many countries have become subservient to others due to money; nations have visited atrocities on humanity due to money; some families have broken down due to money; people have killed for money.

Some call it tiger-paper; others call it lifeblood; and still others call it the devil. But wait a minute: whatever and however you call it, is it money that is at fault or man is? Well, why should it be that God made man in His image to worship Him; yet when man discovered money, he made it his god and king to worship (Mammon), instead of the other way round? So, the fault then is

with man himself and not money per se.

It is this divinity that we have accorded money that reflects in management and economics. And that is why the shareholder’s interests hold paramount in management to the neglect of the other critical stakeholders. The result is the emergence of false development that has driven mankind in general into dismay.

Nature Weeps. In the name of shareholder value maximization and economic development, industries have literally raped and tortured nature. Our water bodies, including the oceans, have been polluted, lands have been degraded, forests have been decimated and the air we breathe has been fouled!

Today, due to climate change triggered by man’s greed and quest for development, the level of the sea has risen, causing sea erosion of land along several coastal towns and cities, destroying property and displacing numerous people.

Furthermore, using the sea as garbage dump, plastics, sewage, industrial waste and so forth are continually dumped into it. Yet our very lives depend on the oceans! According to the Encyclopaedia Britannica, 90% of the air we breathe comes from the sea. So, if in the name of economic development, we are doing this to the sea is that development positive? Is it beneficial?

Also, adequate fresh, pure water has become a luxury. Many homes and communities are without water, especially in the ‘developing’ world. Yet, the ‘developed’ world is not without polluted water running through their taps. Globally, we are all suffering from ailments that are water-borne. According to the Audubon Society booklet Water: The Essential Resource: “One-third of humanity labors in a perpetual state of illness or debility as a result of impure water; another third is threatened by the release into water of chemical substances whose long-term effects are unknown.”

Regarding the loss of forests to activities such as farming, mining and logging, the Food and Agriculture Organization of the United Nations, Italy stated: “Although the rate of net loss of forest has decreased in recent years, the world is still losing about [80 square miles] [200 sq km] of forest a day.” Do we call that true development?

Society Is Crumbling. Societies of ‘developed’ economies are crumbling, thanks to the shareholder’s interest. To make the shareholder richer, spouses spend very little quality time together. And this has contributed to many married couples distancing from each other, eventually leading to divorce in some cases. Children also do not get to spend enough quality time with their parents, although they may be showered with expensive gifts and all the conveniences of life. Eventually, they end up spoiled and deviant, invariably. Yet the shareholder views himself as a benefactor who puts food on the table, roof over heads and clothes on backs!

However, that is not the case with developed countries alone. Following Western hegemony of ‘development’, ‘developing’ countries are also following suit. The family, the basic institution of society—its very foundation—is thus fast crumbling, bringing in its wake several ill-consequences for the entire human society!

Human Resources Are Being Exploited. As stated above, the employee who sacrifices all of his comforts and even some familial responsibilities to make the shareholder richer is rather made to view the shareholder as his saviour! Yet he’s being exploited! In what ways?

First of all, the employee is treated as one whose value ends with what he does for the organization. He is thus labour, a cog in the machine and nothing more.

But quite apart from that, some are given a false sense of consciousness and well-being. They only realize how much they have been exploited after retirement. Once their services have been disposed of, many sink low into a state of despondency, poverty, and more while the shareholder enjoys their fruitage well into his old age and death. Following that, his descendants come to also enjoy it!

Employees are also exploited when in the interest of increasing shareholder value, management set them against each other in unbridled competition for higher ‘productivity’ that is rewarded with promotion up the corporate ladder. Many of those that thereby succeed then tend to view themselves as better species than the others. This has led to employees being alienated from each other by viewing one another as competitors first; and humans second.

Customers Are Being Exploited. Thanks to their base instincts to crave more, in the interest of the shareholder, management and the economy have succeeded in creating more and more needs out of wants for customers. This way, they succeed in getting customers to either over-work themselves or indulge in social vices so as to afford those things.

Furthermore, customers have been made to calculate their value in what they possess and the like instead of the true person within them. Any wonder that there’s so much haughtiness, lovelessness, mechanical relationships and brute behavior in society?

Puppet Management. Management has thus become a puppet in the hands of shareholders whose bidding they carry out.

Instead of considering the general good, management concerns itself more with the balance sheet. It is this tendency that has led to the brazen disregard for the most critical stakeholders of management. As we have been discussing, nature, society/humanity, human resources and customers have all been suffering due to management’s dummy role.

The time has thus come for management to be re-invented in order to give greater attention to the most important stakeholders of management. That is the only way that true development can come about.

Development is associated with civilization. Hence the ‘developed’ world is referred to also as civilized countries. How true is that? Or is it another charade designed to deceive the unwary? We will be discussing that in the final part of the series.

The author Jules Nartey-Tokoli is Founder and Group CEO at Groupe Soleil Vision, comprising Soleil Consults, LLC, NubianBiz dot Com and Soleil Publications. He has lived and worked in both Ghana and the United States, having extensive experience in Strategy, Management, Entrepreneurship, Premium Audit Advisory and Web consulting. He has also published several articles on Strategy and Management among others.