Two years on from Enron, the litany of problems facing equity capitalism has been well aired.
The simple reality is that the misbehaviour of a small number of rogue executives, analysts and bankers has made life much harder for the majority who are honest, hardworking and eager to enrich their shareholders, employees, customers and communities. Peter S Cohan argues that what executives need now is a way to rethink their businesses that will inspire people and revive corporate performance.
First the good news. There are companies that planted the seeds of their greatness in the midst of economic gloom by responding effectively to scarcity and challenge. These companies have followed a fundamental axiom of business that has eluded rogue executives: business depends on trust – creating it, preserving it and, above all, valuing it. When trust is absent business suffers in the long run. Trust is about relationships, in which people’s actions correspond with their words; and the relationships that matter in business are with stakeholders – customers, investors, employees, suppliers, communities and others.
Conversely, when this simple truth is appreciated – and held up as a corporate creed – people within an organisation tend to find it inspiring. We must address the problems in our corporate cultures by inspiring people to act in the right way – not simply because it is right but because they and their organisations will be better off as a result.
The importance of building relationships on trust, and of inspiring behaviour that serves those relationships, is central to the concept of “Value Leadership”. Moreover, companies’ adoption of the Value Leadership concept is so closely tied to their superior financial performance that Value Leadership pays.
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