Women and the New Business Leadership by Peninah Thomson and Tom Lloyd_1 docx

10 BusIness at a Crossroads
evolutionary. To understand how we have got to where we are, we must
return to the origins of business and its organizations, and retrace our
steps back to the present. Such an exploration of the antecedents of the
modern corporation leads us, I will suggest, to the conclusion that one
reason why today’s dominant corporate form differs from the form
most people want is because it is adapted to an older environment.
In Chapter 3, the adaptive pressures on the corporation created by
the differences between its EEA in the mid-19th century and today’s
environment are examined in more detail. I will suggest that many of
the corporation’s original advantages are either less valuable now or
have become disadvantages, and the conventional company has thus
become vulnerable, in principle, to the invasion of its niche by other,
better adapted variants.
The conventional corporation has become vulnerable, because it has
not changed; has not adapted adequately to changes in the business envi-
ronment. It has also become vulnerable in another way, because it has
changed – changed for the worse. Chapter 4 explains how the decadence
of the corporation, exemplified by the seriously bizarre sums of money
paid to executives, threatens the liberal capitalist system that sustains it by
undermining the consensus that sustains liberal capitalism.
Chapter 5 investigates the causes of this decadence and attributes it
not so much to the standard explanation, greed, as to a serious inefficiency
in the market for senior executives caused largely by the pyramidal shape
of modern corporations. I will argue that this shape is so deeply embedded
in modern business culture that no one questions its implicit presumption
that, to be successful, a large company requires an exceptionally able and
charismatic leader. The consequence of this standard, hierarchical model is
that power and pay are invariably drawn, as if by a siphon, to a CEO space
at the top insulated from normal market disciplines.
Some will argue that there’s another, more prosaic reason for very

high levels of CEO pay; namely that CEO work is very difficult and
demanding, those who can do it well are as rare as hen’s teeth and their
pay simply reflects the market clearing rate for these “rare skills.” Chapter
6 challenges the assertion that the CEOs of large corporations are really
worth their weight in gold every year. The role of luck in business success
is discussed, various CEO “agency costs” are examined, and the extent to
which others, including the company’s workforce as a whole and outside
consultants, contribute to the successes for which only the CEO is
rewarded, is explored.
Part II, “Reforming big business,” begins in Chapter 7 with a
discussion of some roads not taken in the evolution of enterprise, which
9780230_230941_02_intro.indd 10 09/09/2009 10:07
IntroduCtIon 11
could have led to a different place. These discarded threads of possi-
bility are developed, with the help of complexity theory, into an exam-
ination of the prospects for leaderless enterprise, of the kind exemplified
by the Linux software system and Wikipedia. This is my third protago-
nist – the multi-agent business enterprise; the challenger – the nemesis
of the conventional CEO-led company if it fails to adapt.
Chapters 8 and 9 each focus on a particular adaptation open to the
CEO-led company; appointing more women to senior positions, and so
moderating the masculine corporate persona which has become such a
liability recently, and reducing CEO omnipotence, by entering into
more business partnerships.
Finally, in Chapter 10 I sketch out the elements of a “System
Restore” procedure for the large company. My main argument is that
corporations should become more sensitive to their environment; to the
hunger of their employees for self-respect; to the demands of those who
shape their political environment for fairness, openness (or “transpar-
ency” as modern parlance has it), decency and an acknowledgement of

social and environmental responsibilities. I am a great believer in the
power of simple rules (for compensation in capital markets, for instance)
to steer, channel or nudge people and companies in desirable directions.
By adjusting, tuning and thoughtfully tinkering in this way we can
create new background conditions that will encourage companies and
their leaders, if leaders there must be, always to behave in ways that
maintain economic and financial stability, and the essential political
consensus that sustains the system of liberal capitalism from which
companies derive their licences to operate.
Liberal democracy and its economic system, capitalism, is the best
system for creating and maintaining free and prosperous societies so far
devised. It would be a tragedy if the decadence of its main business
institution led us, as voters, to abandon it and exchange some of our
freedoms for the promise of a fairer society.
The large CEO-led joint stock company can and must be reformed.
Reference
1 A Theory of Justice, Harvard University Press, 1971.
9780230_230941_02_intro.indd 11 09/09/2009 10:07
This page intentionally left blank
PART I
What ails big business
9780230_230941_03_cha01.indd 13 09/09/2009 10:00
This page intentionally left blank
15
1 What people want
The most challenging long-term problem facing companies is not the
speed of change, although that’s relentless; it is not the growing
complexity of business and finance, although that is becoming more
convoluted by the month; nor is it the risks that complexity brings with
it, although, as the crash showed, they are horrendous. It is not disruptive

new technology, although that is coming thick and fast; nor the capri-
ciousness of customers, although they’re becoming less and less predict-
able; neither is it competition, although that’s intensifying all the time.
All these certainly add to the difficulty of the modern management
problematique, but all pale into insignificance beside the problem
modern businesses have with people; or rather, to put it the right way
round, the problems people have with modern businesses. Work can be
enjoyable, fascinating, satisfying, and enriching, both intellectually and
materially. At the best of times, it’s a source of peak experiences, firm
friendships, and illuminating insights into how the human psyche,
including your own, and the world work. It can give meaning and
purpose to life. It can bring out the best in people. It can be a rich
source of self-respect.
But there’s also the frustration when you are told to do something
you think is wrong or prevented from doing what you feel is right; the
humiliation when less able people are promoted and you’re not. There
is the unfairness; the bureaucracy; the regimentation; the excessive
demands; the shame when your company behaves unethically or
unkindly; the sense of powerlessness when the leader reassigns roles and
tasks without consulting the people affected, or, on the advice of a few
smart “here today, gone tomorrow” consultants who don’t seem to
know their arses from their elbows, implements a new strategy any fool
can see will be disastrous.
Because large companies need specialists, people tend to get stuck in
departments or roles that seemed interesting and challenging to begin
with, but turn out to be backwaters. Others languish in the ghettos of
“non core” or “pink collar” support functions, far from the mainstream.
Many feel they are paid less than they’re worth or that they are going
9780230_230941_03_cha01.indd 15 09/09/2009 10:00
16 BUSINESS AT A CROSSROADS

nowhere, because the powers that be appear to value political skill more
highly than business competence.
How many middle managers can honestly say they do not occasion-
ally resent the fact that their so-called leaders, who often seem to be
reckless or breathtakingly incompetent, are paid hundreds of times
more than they are, or have not thought to themselves, “I’m outta
here!”, but have buttoned their lips in the interests of those who depend
on them?
Companies are made by, but not for people. There is always tension
and often open conflict between the interests of the organization, and
the interests of its employees. If you are the Chief Executive Officer
(CEO), things are different, because you have “powers of sovereignty”
that your employees lack. But even you may feel the demands of the
market and of your investors are unreasonable, and that you have been
treated or judged unfairly.
Some companies are better places to work than others, but there is
no denying that many are seen by their employees these days as being
illiberal, unfair, callous, irresponsible, and presumptuous in the demands
they make on the time of those who work for them. This may help to
explain why there’s so much talk now about an epidemic of work-
related stress.
A 2000 European Working Conditions Survey found that work-
related stress was the second most common work-related health
problem in the European Union (EU), after back pain. It has been
linked to cardiovascular diseases, musculoskeletal disorders, particularly
back pain, and the so-called RSIs (repetitive strain injuries), as well as to
absenteeism.
It occurs when workers are presented with work demands that
exceed their knowledge, skills or abilities, such as time pressure or the
amount of work, the difficulty of the work or an inability to show one’s

emotions at work.
Time pressures at work have been growing. According to a report by
the European Foundation for the Improvement of Living and Working
Conditions, the percentage of employees working at very high speed
rose from 48 percent in 1990, to 56 percent in 2000. The report also
found that, of those working continuously at very high speed, 40
percent suffered stress, compared to only 21 percent of those who never
worked at very high speed.
1
Causes are linked to the work itself: such as work demands and the
lack of freedom to control one’s work (autonomy); combinations of
high demands and low autonomy; and combinations of high efforts and
9780230_230941_03_cha01.indd 16 09/09/2009 10:00
1 WHAT PEOPLE WANT 17
low rewards; and the individual’s characteristics, such as an inability to
cope with pressure. Stress is particularly strong when an employee’s
autonomy is threatened. Fear of underperforming and of its conse-
quences causes anxiety, anger, and irritability.
Stress is more likely in people who tend to be over committed to
their work, and lack self-confidence. Stress is less likely if the employee
has a high degree of control over his or her work, and if the work
requires a variety of skills.
OK, so work-related stress is one of those ailments that tend to
become more common when they are named. But there is no doubt
work became more stressful after the unilateral repudiations during the
downsizings in the early 1990s of the old “loyalty, for security” psycho-
logical contract, that the 24/7 rhythm of today’s companies and inten-
sifying global competition have increased work pressures, and that the
lack of a work–life balance puts hapless employees between the rock of
insatiable work demands, and the hard place of family responsibilities.

It is not so much hard work itself that causes stress, as the lack of
autonomy, and the inability of the employees of large, CEO-led compa-
nies to set their own work rhythms and pace. This may go some way
toward explaining why, according to U.S. Census Bureau figures, the
number of non-employers (mostly self-employed people and small
unincorporated businesses) rose by over 35 percent to 21 million
between 1997 and 2006, compared to an increase of less than 14
percent to 120 million in the numbers of company employees.
The contract between employer and employee increasingly favors
the former, and is thus becoming less acceptable to the latter. A new
contract is needed, which acknowledges the hunger of employees for
self-respect both at home and in the workplace.
Self-respect is a primary good
Francis Fukuyama suggested, in his book The End of History and the
Last Man,
2
that the prime movers in the human journey to what he
argued was the political end-state of liberal democracy, were the superi-
ority of liberal economics and the human desire for what he called
“recognition.”
Our desire for recognition was identified by Plato in the Republic
where he argued the human soul incorporated a “desiring” part, a
“reasoning” part and thymos (“spiritedness”). “Desire induces men to
seek things outside themselves,” Fukuyama explained, “reason … shows
9780230_230941_03_cha01.indd 17 09/09/2009 10:00
18 BUSINESS AT A CROSSROADS
them the best way to get them. But in addition human beings seek
recogni tion of their own worth, or of the people, things or princi ples
that
they invest with worth.” Fukuyama sees thymos as a desire for self-

esteem and as an in

nate sense of justice:
People
believe that they have a cer
tain
worth and when other people
treat them as though they are worth less than that, they experience
the emo

tion
of anger … when people fail to live up to their own
sense of worth, they feel shame, and when they are evaluated correctly
… they feel pride. The desire for recognition and the … emo
tions
of
anger, shame and pride are parts of the human per
sonality
.
Hegel saw history as man’s “struggle for recognition.” Machiavelli
wrote of man’s desire for glory. Hobbes recognized the importance of
pride. Rousseau originated the term amour propre. Nietzsche noted
physiological evidence of our need for self-respect, by describing man as
a “beast with red cheeks.”
You do not have to subscribe to Fukuyama’s “end of history” theory
to recognize the existence within yourself of thymos; a hunger for recog-
nition and self-respect. John Rawls said self-respect was the most impor-
tant “primary good.” He defined it as follows:
First of all … it includes a person’s sense of his own value, his …
conviction that his … plan of life is worth carrying out; … second,

self-respect implies confidence in one’s ability to fulfill one’s inten-
tions. When we feel that our plans are of little value, we cannot
pursue them with pleasure, or take delight in their execution. Nor,
plagued by failure and self-doubt, can we continue in our endeavors.
It is clear then why self-respect is a primary good. Without it
nothing may seem worth doing, or if some things have value for us
we lack the will to strive for them. All desire and activity becomes
empty and vain, and we sink into apathy and cynicism.
3
Rawls built his philosophy of “justice as fairness” on the primary
good of self-respect; Hegel saw the struggle for recognition as the
engine of history. Fukuyama saw the hunger for self-respect as one of
the drivers of the evolution of human societies toward the political end
state of liberal democracy.
But although the human hunger for self-respect has been a powerful
stimulus of social and political developments, it is too general a hunger
on which to build, as I will try to do, a new framework for business
organization. We need to unpack it a little, to derive a list of workplace
9780230_230941_03_cha01.indd 18 09/09/2009 10:00
1 WHAT PEOPLE WANT 19
qualities, the presence or absence of which will increase or reduce the
chances that those who occupy it will learn to respect themselves.
Let us start with a thought experiment. Readers are invited to put
themselves in a workplace version of Rawls’s “original situation,”
behind a “veil of ignorance,” where they know nothing of their own
characters, abilities and attitudes to risk, and nothing about the world
of work they’re about to enter, apart from knowing that work they
must, to provide for themselves and their families.
What workplace qualities would you regard as desirable? Forget how
things are, and how it seems they must be, and try to imagine, in general

terms, which among all conceivable workplace qualities and arrange-
ments you, given the choice, would choose for yourself.
If John Rawls had been asked this question he might have concluded
that, behind the veil of ignorance, most of us would say we wanted our
workplaces to be “free,” “fair,” “reasonable” and “decent.”
Free
We are constrained by the organizations that employ us, and by our
need for the money they pay us. We have to sacrifice and suppress parts
of ourselves for the sake of our employing organizations and our careers.
We are compromised by our employment, because it can prevent us
from realizing our potential, by obliging us to follow only those paths
our employers lay out for us, and take only those opportunities they
make available to us. We may suspect that, in different circumstances,
we could have developed in very different ways and discovered in
ourselves different talents and abilities, the development of which might
have satisfied us more, and made us feel more fulfilled. But we are
trapped by our situations, and the passage of time. We might be proud
of our achievements so far and excited by the opportunities open to us,
but we can never be sure that the person we have become, and can
become, is the best of the persons we could have been, or could become.
We can never be sure of that of course, but we know our chances of
realizing our potential and maximizing our self-esteem depend, to a
large extent, on how open our circumstances are; on how free we are to
change our situations. We value freedom highly, because the freer we
are, the greater the chance we will find places where we can shine and
become fulfilled. We know luck plays a large part in determining where
we end up, and how we feel about ourselves, but, more and more
nowadays, we are attracted to open situations in the middle, rather than
on the banks of the river of fortune.
9780230_230941_03_cha01.indd 19 09/09/2009 10:00

20 BUSINESS AT A CROSSROADS
In other words, we are attracted to situations where our fates are not
set in stone and, thus, to relatively “liberal” organizations, that seem
less likely to trap us in narrow specialties, or typecast us, on the basis of
what we are, or have been, at the expense of what we will or could be.
We want to work in organizations that offer us a wide range of oppor-
tunities; that see us as developing individuals; that don’t try to brain-
wash us into believing in them more than in ourselves; and that respect
our need for self-respect, and the freedom to experiment, and to test
ourselves in various roles and working arrangements.
Fair
Fairness is a sine qua non of a just society. Although what’s fair in a
particular situation is sometimes hard to divine, most of us recognize
with our emotions situations in which issues of fairness arise. We may
feel anger, outrage or indignation, depending on the circumstances,
when it seems to us that we or others we care about are treated unfairly
and most of us abhor favoritism, nepotism and cronyism.
The sense of what is fair and unfair is deeply rooted in us. Young
children become aware of the concept of fairness at an early age. They
may not understand its full social implications until later, but their
tantrums and frustrations, even when ignited by selfish hungers, are
expressed with a stamp of the foot and the cry: “It’s not fair!”
Fairness is as vital in our psychological development as oxygen is in
our physiological development, and it’s an essential background condi-
tion for a peaceful and harmonious society. This human hunger for fair-
ness has led to the rise of liberal democracy and to its current position as
the world’s dominant, though not yet universal, system of government.
The modern workplace is not a fair place and the company is an odd
kind of institution to have survived for so long in a world where liberal
democracy is, or, at any rate, is becoming, the standard political system.

In political terms an institution in which power is vested in a single
individual is a living fossil – a throwback to feudal times.
Some say the company would not work as a liberal democracy, and
it would be absurd if CEOs were elected by employees, or were obliged
to put their strategies and policies to employee votes. But if, as history
suggests, human beings have this innate hunger for liberal democracy in
their political lives, they’re unlikely to settle, in the long term, for
anything less than its equivalent in their work lives.
I’m talking here of the long-term evolutionary trend, not imminent
upheaval. The “democratization” of companies is inevitable, but it will
9780230_230941_03_cha01.indd 20 09/09/2009 10:00
1 WHAT PEOPLE WANT 21
come about, not suddenly, through employee coups d’état, but gradu-
ally, through the migration of able people from tyrannical to more
democratic organizations.
We are the agents of the evolution of working arrangements. Things
will change because we have needs, and will take our talents, and the
competitive edges associated with those talents, to workplaces and
organizations that can best satisfy those needs.
Others say the constituents of a company are its shareholders, not its
employees. In a legal, formal sense, of course, they are quite right. But
to deny political rights to employees, because they are not shareholders,
is to behave like the Athenians when they denied political rights to
slaves, because they were not citizens.
One does not have to subscribe to the “stakeholder” concept of the
company to acknowledge that, although a company’s employees cannot
hold its executives to account in the same way as shareholders, a company
will get into trouble if its executives fail to take into account their employ-
ee’s political needs and desires, particularly their desire for self-respect.
It seems highly unlikely that employees will continue indefinitely to

allow workplaces to be controlled by external shareholders. The polit-
ical equivalent would be heterarchy (rule by an alien). Once again, the
transfer of power from external shareholders (who have, in any case,
delegated most of their power to their CEO) will come about, not
through the reform of existing corporate constitutions, but through the
gradual migration of talented and competent people from conventional
companies, controlled by the agents of external owners, to companies
majority owned by their employees or companies with more employee-
orientated constitutions.
Reasonable
The recognition that, in addition to formal constitutional matters such
as who owns the company and has rights to its free cash flow, there are
practical constitutional matters, such as the likelihood that good people
will leave if they believe they are being treated un f
airly, has led to an
interest in constitutional issues, such as just and fair procedures. It has
been suggested, for example, that employees will only comply with deci-
sions that are disadvantageous to them, when they feel those decisions
were reached in a just way after full consultation with those affected.
Procedural justice is necessary, but not sufficient. Other aspects of
justice, including fair rewards for work (of which much more in Chapter 4)
9780230_230941_03_cha01.indd 21 09/09/2009 10:00
22 BUSINESS AT A CROSSROADS
also influence the extent to which employees regard the company’s proce-
dures, processes, assignments and distributions (of power, status and
reward) as fair. To minimize the risk that their good people will leave,
because they find the company’s political atmosphere obnoxious, frus-
trating or uncomfortable, managers would be well advised to look
beyond the management debate, to the wider discourse of political and
moral philosophy.

In The Law of Peoples
4
John Rawls applied the two “principles of
justice” he had set out 28 years earlier in A Theory of Justice to interna-
tional relations. The later book, which includes a restatement of his idea
of public reason, has nothing directly to do with management, but
includes two related ideas of interest to managers who want to create
and maintain a fair political climate.
The first is the distinction between “peoples” and “states.” Rawls
defines a “people” as being united by a common outlook on life. This
differs from a “state,” in that it lacks a state’s “powers of sovereignty,”
including rights to wage war and govern its people.
The same distinction can be drawn between the people employed
by a business and the person who leads it. The fact that a company is
a people, as well as a state, is important, because a people may not
always see eye to eye with the state it comprises. The company, as a
people, cannot bid for or form an alliance with another company, for
instance, open or close plants or branches, downsize, raise new capital,
or devise and implement a strategy. These are “powers of sovereignty,”
and are the prerogatives of the leadership, which embodies the
company as a state.
But although mergers, acquisitions and alliances, for example, are
brought about by the leadership, whether or not they create value for
shareholders depends partly on whether the “peoples” involved find a
value-creating modus vivendi. Unlike shareholders, employees cannot fire
leaders who make bad acquisitions, but they can quit, refuse to cooperate
or actively obstruct post-merger integration, and so help determine whether
or not the acquisition creates value for the acquirer’s shareholders.
The other idea in The Law of Peoples that should be of interest to
companies is the distinction between “rational” and “reasonable.”

According to Rawls, the difference between a state and its people:
rests on how rationality, the concern with power, and a state’s basic
interests are filled in. If rationality excludes the reasonable (… if the
state is moved by the aims it has and ignores the criterion of reci-
procity in dealing with other societies); if a state’s concern with
9780230_230941_03_cha01.indd 22 09/09/2009 10:00
1 WHAT PEOPLE WANT 23
power is predominant and if its interests include such things as
converting other societies to the state’s religion, enlarging its empire
and winning territory, gaining … prestige and glory, and increasing
its relative economic strength – then the difference between states
and peoples is enormous. Such interests as these tend to put a state
at odds with other states and peoples, and to threaten their safety
and security, whether they are expansionist or not.
Suppose a company has to move its offices. The “rational” approach
would be to instruct a relocation consultant to find the cheapest
premises that fulfill certain criteria for quality, facilities, logistics and so
on. A more “reasonable” approach would be to move to an area that
minimizes the travel times of employees. In a company where the
second, reasonable approach seems natural, there may not be much
difference between the company as a state, and the company as a people.
In a company where the first approach is preferred by the leader
(embodying the company as a state), where the leader’s “rationality”
excludes the “reasonable,” ignores the interests of employees (embod-
ying the company as a people), and other companies and their employees,
and is driven by the leader’s interests, such as a desire for enlargement,
prestige and wealth – the differences between the company as a “state”
and the company as a “people” may be enormous.
Interests such as these tend to put a company at odds with its own
employees, and with other companies and their “peoples.” They lead to

rational, but unreasonable behavior, such as predatory pricing and
buying, late payment of suppliers’ invoices and other abuses of market
power, and threaten the solvency of other companies, and thus the live-
lihoods of their employees.
In other words, a decision by a company to acquire another company
or to pay its invoices late, as a matter of routine, in an effort to appropriate
more than its fair share of trade credit, could be “rational,” in respect of
the firm’s own, basic interests, but is “unreasonable” in respect of the
interests of its people and other companies and their peoples. Peoples
have basic interests, such as security, safety, fair rewards and the freedom
of their members to pursue their ambitions and realize their full potential,
but these interests are confined to those that are “reasonable.”
The implications of the difference between reasonable and rational
behavior go far beyond fair processes. One implication is that the compa-
ny’s political climate will be determined, in part at least, by whether
employees (embodying the company as a “people”) regard the behavior
of the leader (embodying the company as a “state”) as reasonable.
9780230_230941_03_cha01.indd 23 09/09/2009 10:00
24 BUSINESS AT A CROSSROADS
Some will argue that employees cannot be expected to understand or
be moved by the need to buy market share, or downsize; that they are not
privy to the relevant information, or capable of grasping the thinking that
makes such actions “rational”; and that it’s not their place to judge the
ways in which their leaders wield their powers of sovereignty.
But whether or not they can grasp the rationale for their leader’s
course of action, and whether or not it is their place to question it,
question it they do, according to what they view as reasonable in respect
of their own, basic interests. And they will be hard to lead if they believe
their leader is behaving unreasonably.
The political climate that helps to determine employee loyalty and thus

the Key Performance Indicator of labor turnover, can also be affected by
high levels of top executive pay. In an allegedly very competitive market for
executive talent, it may be “rational” (or not, see Chapter 5) to pay the
CEO 300 times more than the average middle manager, but it is unlikely
to appear “reasonable” to the average middle manager, particularly if the
reward for a CEO’s failure is a multi-million-dollar “golden parachute.”
I will return to the issue of fair rewards later. My point here is that a
political climate cannot be just if it denies the right of employees to self-
respect. An average middle manager is willing to accept that a talented
executive should be paid considerably more than him or her, but it’s
hard for anyone to accept that he or she is worth barely 0.3 percent of
another manager, however talented. It is not, or not only, a matter of
envy. Most people admire successful entrepreneurs and many seek to
emulate them. It is more a question of perceived justice and the effect a
perceived injustice has on the self-respect of its victims.
It’s true that progressive income tax rates reduce the disparities in
net income and, therefore, contribute to distributive justice. But it is
the gross income of the CEO which is so often seen to be “gross,” and
which thus exerts the most influence on the political climate of the
company she or he leads.
It is hard to quantify the effect of a company’s political climate on
the loyalty of its employees, but it is also hard to believe it is negli-
gible and when there is a “war for talent,” all dimensions of attrac-
tion are important.
Decent
A broader definition of reasonable behavior includes behavior that
abides by normal ethical standards and accepts responsibilities to society
at large. Rawls called such behavior “decent.”
9780230_230941_03_cha01.indd 24 09/09/2009 10:00
1 WHAT PEOPLE WANT 25

I have written elsewhere about the value of a company’s reputation
for behaving ethically and being seen as a good employer, customer and
corporate citizen.
5
But my prediction that most companies would
recognize the value of reputational assets and try to create and preserve
them has not been realized. Big companies are “nicer” than they were
in some ways, but partly because their leaders have become obsessed in
recent years with the quintessentially rational logic of finance, many are
still behaving “rationally” rather than “reasonably” and incurring repu-
tational liabilities as a result.
One day in spring 2001, big business had a particularly rough ride in
the press. Chocolate manufacturers were taken to task for not using
their influence on suppliers to eradicate child slavery in cocoa plan
-
tations, pharmaceutical giants had to abandon a lawsuit they had begun
in South Africa, to protect their patents on anti-Aids drugs and a leading
oil company faced criticism at its annual meeting for alleged exploita-
tion in Sudan.
The pressure groups that find fault with global companies and urge
them to behave more “ethically” are not always articulate or well
informed. In the case of the drug companies, however, it was clear that
the rational insistence of the companies’ leaders that their intellectual
property rights must be protected in the courts, had prevented the
companies from doing what most people, including, no doubt, many of
their own people, saw as the “decent” thing; namely making their Aids
drugs available at a cost poor African countries battling with an alarming
Aids epidemic could afford.
If the drug companies’ CEOs had realized that, although vigorously
protecting patent rights was rational, it was, and would be widely seen

to be, unreasonable to deny millions of poor people access to medicines
they desperately needed, and ignored the advice of their lawyers, their
reputations would have been greatly enhanced rather than gravely
damaged. They did the right thing in the end, but you get no credit for
behaving decently under duress.
How a company behaves affects its reputations with all its various
constituencies; suppliers, customers, partners and the communities in
which it operates. But we are interested here in its reputation with
current and prospective employees. Well-publicized attacks on a
company by pressure groups are sure to affect how the company is
perceived by employees, because employees are associated by others
with their employers’ reputations. They will feel ashamed if their
company is accused of behaving badly, and angry when they believe the
accusation is justified. People want to be thought well of by others.
9780230_230941_03_cha01.indd 25 09/09/2009 10:00
26 BUSINESS AT A CROSSROADS
When others lose respect for the company you work for your own self-
respect is diminished. People are attracted to companies that seem likely
to enhance their reputations and self-respect and will leave companies
that damage their reputations. Whether or not employees understand
the reasons for their company’s actions, they will judge them, according
to what they regard as “reasonable” and “decent.”
Companies are not moral creatures, but people are, and companies
will find it hard to recruit and keep good people if they behave in ways
that seem to violate common standards of decency. This is one of the
dilemmas faced by company leaders. They have a duty to shareholders
to exercise their “powers of sovereignty” rationally, but their need to
retain talented staff obliges them always to act “reasonably.”
Power and powerlessness
Because talented people in business aspire to become leaders, they are

fascinated by the idea of “leadership” and enormous numbers of books
about leadership were, until recently, published every year. It is prob-
ably no exaggeration to say the management discourse was little more
than an extended examination of the qualities, skills and tricks of the
trade of great business leaders, who, for want of better definitions, are
those who lead conspicuously successful companies.
Books that purport to reveal the secrets of great business leaders are
compulsive reading for ambitious middle managers, but there is a same-
ness about them; the same heroes, the same qualities, the same explana-
tions, the same secrets and the same conclusions: if you want to be a
great leader, model yourself on Jack Welch, Bill Gates, Sir Richard
Branson, John Chambers (or whoever’s the latest leader role model).
Michael Brimm, a Francophile American who is Emeritus Professor
of Organization and Management at INSEAD, broke with this big
company leader tradition when he decided to study great French chefs.
To most English speakers the French word “chef” means cook, but
it translates literally as “chief.” “Great chefs don’t cook anything them-
selves” Brimm told me. “They direct organizations of up to 100 people
dedicated to achieving excellent performance, meal after meal. Their
job is leadership.”
At first sight, chefs seem to be very bad role models for aspiring
leaders. “When you walk into a kitchen” said Brimm, “you walk into
an environment that appears to violate practically every modern
management precept. The chef is a dictator, barking out orders and
maintaining a rigid discipline. There’s very little participation. And talk
9780230_230941_03_cha01.indd 26 09/09/2009 10:00
1 WHAT PEOPLE WANT 27
of ‘empowerment’ would be greeted with howls of derisive laughter by
the staff.” Most books on leadership urge managers to avoid criticizing
people, and to try to find something positive to say. Chefs rarely praise

anyone explicitly.
Why are people willing to work long hours in slave conditions, for
up to two years for next to no money under dictatorial leaders who
never praise them? “I have asked many kitchen staff that question” said
Brimm. “They say they would even pay money to work with such chefs.
They say they are learning so much that the ‘investment’ is certain to
help their careers.”
In other words, ambitious young people can work for a pittance, in
terrible conditions under tyrannical leaders, and yet retain their self-
respect, because they see the servitude as a rite of passage; an appren-
ticeship; a necessary step toward realizing their dreams of opening their
own restaurants. Brimm says this dream is part of the kitchen culture.
“Most chefs are very interested in developing people. Because of the
hours they work they rarely meet, but when they do the talk invariably
turns to the people they’ve developed. ‘Have you heard’ one may say
with pride, ‘François, who started in my kitchen, has just got his first
Michelin star?’”
Brimm’s study of chefs highlights the danger of generalizing about
“best practice” in leadership. Most leadership books urge aspiring
leaders to praise generously and emphasize the positive. The chefs of
top French restaurants do neither. It is partly a reflection of the French
culture, in which “pas mal” (“not bad”) is high praise, but there is a
little more to it than that. It is also a matter of expectation and inter-
pretation in the particular situation. On one occasion, Brimm watched
the chef walk up to an apprentice who had just spent 15 minutes
completing a complicated garnish. “The chef tasted the dish, and
emptied the plate into the garbage can saying ‘too salty.’ I went up to
the apprentice afterwards and asked him: ‘doesn’t it ever get to you
that you never get praise?’ He looked at me in astonishment. ‘But I
do! Didn’t you see those times when chef walked by, tasted and walked

on without saying anything. That was great praise. He was telling me
that I had got it right.’”
Brimm says chefs deal in “successive approximations.” Because they
design the dishes, only they can judge whether the presentation is
appropriate and the taste has just enough salt or spice. “The dish is their
creation, and they know when it is just right. It is like the Japanese
master who teaches students, by asking them to copy a character he has
drawn. Because it’s hard to describe exactly what is desired, the learning
9780230_230941_03_cha01.indd 27 09/09/2009 10:00
28 BUSINESS AT A CROSSROADS
comes from approaching perfection through trials and adjustments.
The chef has a vision and a style, and it is the job of kitchen staff to learn
to achieve it. ‘Quality’ lies in the fidelity of replication. This is an envi-
ronment of constant teaching.” The chef says to his apprentices “here’s
the taste” and keeps telling them it is too salty or too sweet until they
get it right. Each sauce will be tasted by the chef and by the person who
prepared it, so that there is always a “meeting of tongues,” so to speak.
When apprentices have learned to do it the chef’s way, they start to
develop their own styles.
Staff accept the dictatorial styles of great French chefs, because they
respect the chef’s artistry. The chef is a master to a team of apprentices
who aspire to be masters. It’s rather like the English pupilage system for
young barristers. The skills and insights you acquire working for
outstanding professionals seem a fair exchange for your surrender of
power, and thus there is no threat to your self-respect.
The chef’s “style” resembles that of entrepreneur leaders of small
firms much more than that of leaders of large firms and, according to
Brimm, it’s characteristic of “the arts.” “Chefs are similar to orchestra
leaders and film directors or ‘artist–leaders,’ as Edgar Schein called
them.” They take pride in the achievements of their apprentices and

pupils, in the same way that parents take pride in the accomplishments
of their children.
The reason why student chefs don’t find their masters’ power (even
when exercised callously) demeaning, is that their relationship is based
on a learning contract. Both parties to the relationship are united in
their wish for the led to become a leader in his or her own right. The
same isn’t true of the relationship between the leaders and employees of
large firms. Much was written a few years ago about “learning organiza-
tions,” and the role of the leader as teacher or coach. But you can’t
learn the way an apprentice learns from a master if you never see your
master, and you can’t respect yourself when you are powerless if you
cannot respect those with power over you. Nothing is more demeaning
than being bossed around by someone you have no regard for.
Self-respect is a primary good, but it’s very hard for individuals to
earn it in large, hierarchical organizations where they are the subor-
d
inates of leaders they rarely see, for whom they have had no oppor-
tunity to develop regard, and with whom they have no learning contracts.
Powerlessness is only tolerable if you believe you are getting something
in return. Security and a good salary were once regarded as a fair
exchange. Now that security is no longer on offer and what is a good
salary (one that, all things considered, seems fair) is determined more
9780230_230941_03_cha01.indd 28 09/09/2009 10:00
1 WHAT PEOPLE WANT 29
by markets than by HR departments, people will tend to leave work situ-
ations in which their self-respect is in the hands of others and seek out
work situations in which it is in their own hands.
The emigration of people from large CEO-led companies is likely to
accelerate over the next few years as a consequence of the current reces-
sion. U.S. Census Bureau figures show that in 2002, during the reces-

sion following the bursting of the dot.com bubble, employment in
companies with more than 500 employees fell by 3 percent while self-
employment rose by 4 percent.
Power, in large companies, is what Fred Hirsch called a positional
good
6
that can only be enjoyed by a few, when it is denied to many.
Everyone wants power, but since not everyone can have it, we have to
settle for being equally powerless. Most of us have agreed in the past
four centuries or so that liberal democracy satisfies this compromise
better than other political systems that have been tried. But we have yet
to find a comparable compromise for working arrangements.
Good work
I have argued that the evolution of working arrangements, and thus of the
company and the forms of association between working people and
companies, are being driven these days by the human hunger for self-
respect. This wasn’t always so. Until recently other hungers, for security
and a minimum level of income, took precedence over self-respect and
allowed the emergence of working arrangements and forms of organiza-
tion where self-respect was hard to come by. Now that people know secu-
rity is no longer available, and markets for abilities and talent have become
much more efficient, their demand for self-respect will not be denied.
On the basis of what has already been said, we can begin to sketch
out the qualities the human hunger for self-respect will encourage
people to look for in their work situations:
■ Freedom to change. People will tend to move to companies that do
offer, and from companies that don’t offer, the freedom to change
course and experiment with other roles and specialisms as their inter-
ests and understanding of their own talents and aptitudes change
and develop.

■ Fairness. People will tend to move to companies where they’ve
reason to believe they will be treated (and rewarded) fairly and they
are unlikely to be victims of the arbitrary exercise of power.
9780230_230941_03_cha01.indd 29 09/09/2009 10:00
30 BUSINESS AT A CROSSROADS
These desires for fairness and freedom to change roles amount to a
desire for “open” working arrangements – “open,” in the sense that
people have freedom to change their circumstances, and “open” in the
sense Sir Karl Popper meant in his idea of “The Open Society” – a
society in which, because of its constitution, a bad ruler can be prevented
from doing too much damage.
■ Reasonable. People will tend to leave companies where “powers of
sovereignty” are exercised in ways that, though rational, appear to
them, given their own basic interests and the basic interests of others,
to be unreasonable.
■ Decent. People will tend to leave companies where the “powers of
sovereignty” are exercised in ways that seem unethical, or violate
common standards of decency.
■ Balanced power. The hunger for self-respect requires power to be
distributed equally. The only unequal power distributions that are
acceptable are those that are of benefit, in one way or another, to the
relatively powerless. (The 2007–08 credit crunch and the subse-
quent recession made it harder to believe the omnipotence of CEOs
is of any benefit to their relatively powerless employees.)
The argument so far
The human hunger for self-respect has led to the spread of liberal
democracies all over the political world, but has not so far had a similar
impact on the world of work. The workplace qualities most people
would agree to behind John Rawls’s veil of ignorance remain conspic-
uous by their absence in today’s large companies. Why? If our hunger

for self-respect has shaped our political institutions, why have the work-
place qualities it demands not yet been provided by our main economic
institutions? This is the question to which we turn in Chapter 2.
References
1 Ten Years of Working Conditions in the European Union, 2007.
2 Free Press, 1992.
3 A Theory of Justice, Harvard University Press, 1971.
4 Harvard University Press, 1999.
5 The ‘nice’ company, Bloomsbury, 1990.
6 Social Limits to Growth, Routledge & Kegan Paul, 1977.
9780230_230941_03_cha01.indd 30 09/09/2009 10:00
31
2 A feudal heritage
The question posed at the end of Chapter 1 was why the company, as
we know it, is so different from the company most of us would like it to
be. Given its dominance of modern business and the very large numbers
of people it employs, why does it not bear the mark, in the same way as
our political system, of the hunger of ordinary people for self-respect?
The evolutionist’s answer is that adaptation is never perfect – it is
work in progress. A species is as it is largely because of its history, and
only partly because what its history has made it is a sufficiently good fit
with the environment for it to survive. The question then becomes,
what is it about its evolutionary history that has made the large limited
liability joint company the way it is?
To answer this question we will begin with an account of a
meeting between a 21st century monarch and a serf, from the serf’s
point of view.
A cat ponders a king
Your project has gone well. Everybody says so. It has been quite a
struggle. You haven’t seen much of your children for the past six

months, but you feel OK – pretty good, in fact. You and your team have
developed a new e-channel for your company’s products and the pilots
that have been running over the past two weeks suggest that it could
generate an extra $25 million of revenue a year.
The CEO is pleased and has summoned you for one of his famous
pats on the back. It is the first time you’ve talked to him one-to-one.
He is friendly, charming and very complimentary. He was two hours
late for your meeting – bad weather delayed the executive jet from
America – but his apology is as handsome as his praise is fulsome.
As you watch his personal assistant shepherd him into the big limo
that will whisk them back to the airport, you think idly about how
different his life is from yours. The limo, the executive jet and the two
hours you spent waiting for him, tell you that his time is infinitely
9780230_230941_04_cha02.indd 31 09/09/2009 10:00