A critique of traditional economy

In an article in the NZZ of April 26, 2014, the editor Andreas Uhlig reported that Andrew Haldane, executive director of the Bank of England, has criticized the foundations of contemporary economy fundamentally. Haldane stated that “the unrestrained self-interest of individuals and companies, greed and unrestricted competition… have harmed society and made it poorer”. He made a case for “rethinking some of the central components of contemporary economy”. This would lead to a redefinition of the basic assumptions and insights of economic theory, and it would also have far-reaching consequences on the level of individual companies and for the Theory of the Firm.  

This critique, formulated by such a renowned figure, is of great interest for our institute, since we have aligned our own research of over ten years towards such a critique of the basic assumptions of the Theory of the Firm and of corporate strategy.

Good stress management

Currently, we are holding a seminar at the University about stress at the workplace and health promotion in companies. The relevance of this issue is evident not only because of the keen interest of our students, but also due to its presence in daily press. Articles on the subject appear almost weekly on all possible aspects of stress:

- how stressed we are („Burnout Is Everywhere“),

- who is affected by it  ("Exhausted dancers make their point"),

- what personal and economic consequences can be observed („Feeling stressed? It's probably harming your health", "Get a life", "Burnout on the rise: Workplace woes adding up"),

- what can be done against it („Stress in the city: how employers can help"

Towards different narratives for the value creation of the firm

A conference was held October 19-21 on stakeholder theory at the renowned Darden School of Business. Forty participants were invited, all academics who had recently made important contributions to stakeholder theory or stakeholder management. A fascinating uplifting atmosphere prevailed. This was already demonstrated by the conference location. On the one hand, there were the historical buildings of the University of Virginia, built according to the plans of Jefferson, founder of the University and later third President of the USA, a true architectural jewel. On the other hand, not far off is the extremely modern and generously designed building of the Darden School of Business; a symbol of the will and strength to find and develop new forms of research and teaching in management.

Contained in these illustrative surroundings, in both senses of the word, the discussion took place among the leading scholars of stakeholder theory. The participants agreed that the failure in recent years of the management generation, and the blatant market failure of the financial industry in particular, necessitates that the theory of value creation in firms and their respective management needs to be reconsidered. The dominating opinion is that the “intellectual comfort zone” of the current theory needs to be abandoned, and new theoretical approaches have to be developed on the basis of assumptions that are more humanly relevant and that lead to positive narratives of the value creation of the firm.

In particular, the question was debated as to which of the basic assumptions of the previous theory of the firm and of conventional management understanding have to be changed in order to do justice to the current situation of the operative reality of businesses, and to develop positive narratives for a firm’s value creation. In different sessions, the participants’ requirements of theories were two-fold. Either one extends the current assumptions of the mainstream theories, as stipulated for instance by the stakeholder theory of the firm, which can induce gradual changes in the theories, as a basis for positive narratives for the management. Or one embraces a more radical change of assumptions, which leads to disruptive changes in strategy theories and practices regarding the theory of value creation. The final conclusion was that the time is ripe for a change. Let’s seize it!

 Sybille Sachs