It does seem like Jensen was key in evangelizing ideas that tied executive compensation to stock performance. This even led to a 1993 IRS rule [1]. Here "valu

It does seem like Jensen was key in evangelizing ideas that tied executive compensation to stock performance. This even led to a 1993 IRS rule [1]. Here "value" was clearly shareholder value; the dollar value of stock. Then, in 2000, on the verge of the Enron collapse, Jensen offered an updated theory - "Value Maximization and the Corporate Objective Function" [2]. Here, he suggested that the definition of "value" perhaps needed to evolve, and consider stakeholders. However, I'm not sure this later work had the impact of changing executive compensation, or corporate decision-making, probably just created debate. Probably feels something like not being able to fix a bug in production.. "Undeniably one of the most influential business theorists of modern times, he (Michael Jensen) advocated an “agency” theory of management in which management’s sole duty was to maximize shareholder value. This upended the long-held “stakeholder” model, in which management was seen as having broader obligations to a corporation’s workers, customers and communities." Wikipedia [1]: "After Jensen and Murphy (1990), Congress passed a law, making it cost effective to pay executives in equity. As a result, executives had a financial incentive to focus their efforts on increasing stock price. In the short run, some executives even manipulated accounting numbers (e.g., Enron, Global Crossing) to achieve this goal" HBS '00 [3]: Jensen, new theory of Enlightened Value Maximization: "We must give people enough structure to understand what maximizing value means so that they can be guided by it and therefore have a chance to actually achieve it. They must be turned on by the vision or the strategy in the sense that it taps into some human desire or passion of their own—for example, a desire to build the world’s best automobile or to create a film or play that will move people for centuries. All this can be not only consistent with value seeking, but a major contributor to it. And this brings us up against the limits of value maximization per se. Value seeking tells an organization and its participants how their success in achieving a vision or in implementing a strategy will be assessed. But value maximizing or value seeking says nothing about how to create a superior vision or strategy. Nor does it tell employees or managers how to find or establish initiatives or ventures that create value. It only tells them how we will measure success in their activity." [1] https://en.wikipedia.org/wiki/Michael_C._Jensen https://en.wikipedia.org/wiki/Michael_C._Jensen [2] http://www.hbs.edu/faculty/Publication%20Files/00-058_f2896ba9-f272-40ca-aa8d-a7645f43a3a9.pdf http://www.hbs.edu/faculty/Publication%20Files/00-058_f2896b... [3] http://hbswk.hbs.edu/item/value-maximization-and-stakeholder-theory http://hbswk.hbs.edu/item/value-maximization-and-stakeholder...