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What to Measure in the Twenty-first Century?

In: Corporate Social Responsibility

Author

Listed:
  • Lance Moir
  • Mike Kennerley
Abstract
One of the main governance issues that boards have to face is what to measure and, in particular, how to set appropriate performance goals for operating managers. If governance is about the ‘the relationship among various participants in determining the direction and performance of corporations’ (Monks and Minow, 2004), then we need to address who the participants are, how to choose a direction and what constitutes performance. It is precisely this inter-relationship which causes the problem. For many managers the achievement of a single objective — maximisation of shareholder wealth — to a single actor, the shareholder provided enough complexity. Indeed many (e.g. Jensen, 2001) argue that this is all it should be. However, there are other participants — customers, employees, governments who also make claims on the firm and its resources and who also seek ‘performance’. In a traditional shareholder value model, the key decision tool would be based around net present value and ultimate measures of ‘value’. This focus has led boards to think about financial measures such as earnings per share and share price growth. Yet recent financial scandals reflect unethical behaviours whilst societal pressures have also led to risks which can impact on firm value. In a more complex setting, the interplay between firm value and societal value changes the traditional approach. For the senior management of a firm the problem then is how to determine performance in such as way as to satisfy these multiple stakeholders (Freeman, 1984) whilst still meeting the economic objectives.

Suggested Citation

  • Lance Moir & Mike Kennerley, 2006. "What to Measure in the Twenty-first Century?," Palgrave Macmillan Books, in: Andrew Kakabadse & Mette Morsing (ed.), Corporate Social Responsibility, chapter 5, pages 81-93, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59957-4_6
    DOI: 10.1057/9780230599574_6
    as

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