The Quest for Shareholder Value:
Stock Repurchases in the US Economy



William Lazonick
University of Massachusetts Lowell

william_lazonick@uml.edu



Revised December 6, 2008





The research contained in this paper has been supported by The Upjohn Institute for
Employment Research; World Institute for Development Economics Research (WIDER);
ESEMK project funded by the European Commission under the 6th Framework Programme
(contract CIT2-CT-2004-506077); and The Work Foundation (London). Previous versions
of this paper were presented at the Conference on Institutions for Economic Development,
WIDER, Helsinki, April 18-19, 2005; Conference on Perspectives of Corporate Governance,
Wissenschaftszentrum Berlin (WZB), March 9-10, 2006; Conference on Capital Matters:
Managing Labor’s Capital, Harvard Law School, Cambridge, April 26-28, 2006; Workshop
on Finance, Innovation and Inequality, sponsored by the Innovation Knowledge
Development Centre, The Open University, Regent’s College Conference Centre, London,
November 9, 2007; and Conference on Knowledge in Space and Time, sponsored by
Dynamics of Institutions and Markets in Europe (DIME), Université Louis Pasteur,
Strasbourg, April 7-9, 2008.

Many of the ideas presented here reflect my collaboration with Mary O’Sullivan, for whose
insights I am grateful. Yue Zhang, Dimitra Paparounas, Mustafa Erdem Sakinc, He Gao, and
Mindy Lu provided excellent research assistance. This paper draws on material in William
Lazonick, “Shareholder Value and Governance of Innovative Enterprise” in Ulrich Jürgens,
Gunnar Folke Schuppert, Dieter Sadowski, and Manfred Weiss, eds., Perspectives of
Corporate Governance (Perspektiven der Corporate Governance), Nomos, 2007; and William
Lazonick, “The US Stock Market and the Governance of Innovative Enterprise,” Industrial
and Corporate Change, 16, 6, 2007: 983-1035. Central ideas expressed in this paper can be
found in William Lazonick, “Everyone is paying the price for share buy-backs,” Financial
Times, September 26, 2008, 15.

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Lazonick: The Quest of Shareholder Value
ABSTRACT

During the 1980s and 1990s the argument that “maximizing shareholder value” results in
superior economic performance came to dominate the corporate governance debates. In this
paper, I outline the rationale for the shareholder-value perspective, and show that, rooted in
agency theory, it lacks a theory of innovative enterprise. Hence it cannot be used to analyze
the conditions under which the stock market supports or undermines the process of value-
creation. To go beyond agency theory and its shareholder-value perspective, I present a
framework for analyzing the functions of the stock market in the business corporation and the
influence of these functions on the social conditions of innovative enterprise. I then use this
framework to explain why in the United States since the 1990s there has been a widespread
trend in corporate stock repurchases, including a sharp acceleration in buybacks since 2003.
Focusing on a list of the largest corporate repurchasers in the United States, I raise questions
concerning the relation between stock buybacks and value-creating investments in the US
economy as a whole. I conclude with a discussion of why companies do stock repurchases,
and in particular whether they can be justified as a contribution to innovative enterprise. I
argue that the ultimate justification for stock repurchases is the ideology of “maximizing
shareholder value” – an ideology that works to the direct benefit of corporate executives who
make corporate resource allocation decisions and who derive high levels of remuneration
from munificent stock option awards.



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Lazonick: The Quest of Shareholder Value
1. Innovative Enterprise and “Shareholder Value”

In all of the richest economies, business corporations are repositories of large, and in many
cases vast, quantities of resources over which corporate managers, rather than markets,
exercise allocative control. Indeed, it can be argued that corporate control, as distinct from
market control, of resource allocation represented the defining institutional characteristic of
twentieth-century capitalist economies (Chandler 1977 and 1990). Whereas the neoclassical
theory of the market economy maintains that markets should allocate resources to achieve
superior economic performance, the actual pervasiveness of corporate control over resource
allocation demands a theory of the ways in which corporate governance affects economic
performance.

During the 1980s and 1990s the argument that “maximizing shareholder value” results in
superior economic performance came to dominate the corporate governance debates. This
shareholder-value perspective represents an attempt to construct a theory of corporate
governance that is consistent with the neoclassical theory of the market economy. Like the
theory of the market economy, however, the shareholder-value perspective lacks a theory of
innovative enterprise (see O’Sullivan 2000; Lazonick 2003b and 2007b). The result is that,
as I argue in this paper, the shareholder-value perspective on corporate governance fails to
comprehend how and under what conditions the corporate allocation of resources supports or
undermines investment in innovation.

In Section Two of this paper, I outline the theoretical rationale for the shareholder-value
perspective, and show that it lacks a theory of innovative enterprise. In Section Three, I
provide a critique of the shareholder-value perspective based on the ways in which an
innovative corporate economy, including the stock market through which public shareholders
participate in the corporation, actually operates. In Section Four, I outline an approach to
analyzing the functions of the stock market – described alliteratively as “creation”, “control”,
“combination”, “compensation”, and “cash” -- in the business corporation. In Sections Five
through Nine, I explore the influence of these functions on innovative enterprise, culminating
in the “negative cash” function of the stock market that results from stock repurchases. In
Section Ten, I conclude by asking why companies repurchase their own stock, and what
impact repurchases have on innovative enterprise.

2. Maximizing Shareholder Value

For adherents of the theory of the market economy, “market imperfections” -- for example,
“asset specificity” in the work of Oliver Williamson (1985 and 1996) -- necessitate
managerial control over the allocation of resources, thus creating an “agency problem” for
those “principals” who have made investments in the firm. The agency problem derives
from two limitations, one cognitive and the other behavioral, on the human ability to make
allocative decisions. The cognitive limitation is “hidden information” (also known as
“adverse selection” or “bounded rationality”) that prevents investors from knowing a priori
whether the managers whom they have employed as their agents are good or bad resource
allocators. The behavioral limitation is “hidden action” (also known as “moral hazard” or
“opportunism”) that reflects the proclivity, inherent in an individualistic society, of managers
as agents to use their positions as resource allocators to pursue their own self-interests and

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Lazonick: The Quest of Shareholder Value
not necessarily the interests of the firm’s principals. These managers may allocate corporate
resources to build their own personal empires regardless of whether the investments that they
make and the people whom they employ generate sufficient profits for the firm. They may
hoard surplus cash or near-liquid assets within the corporation, thus maintaining control over
uninvested resources, rather than distributing these extra revenues to shareholders. Or they
may simply use their control over resource allocation to line their own pockets. According to
agency theory, in the absence of corporate governance institutions that promote the
maximization of shareholder value, one should expect managerial control to result in the
inefficient allocation of resources.

The manifestation of a movement toward the more efficient allocation of resources, it is
argued, is a higher return to shareholders. But why is it shareholders for whom value should
be maximized? Why not create more value for creditors by making their financial
investments more secure, or for employees by paying them higher wages and benefits, or for
communities in which the corporations operate by generating more corporate tax revenues?
Neoclassical financial theorists argue that among all the stakeholders in the business
corporation only shareholders are “residual claimants”. The amount of returns that
shareholders receive depends on what is left over after other stakeholders, all of whom it is
argued have guaranteed contractual claims, have been paid for their productive contributions
to the firm. If the firm incurs a loss, the return to shareholders is negative, and vice versa.

By this argument, shareholders are the only stakeholders who have an incentive to bear the
risk of investing in productive resources that may result in superior economic performance
(O’Sullivan 2000 and 2002). As residual claimants, moreover, shareholders are the only
stakeholders who have an interest in monitoring managers to ensure that they allocate
resources efficiently. Furthermore, by selling and buying corporate shares on the stock
market, public shareholders, it is argued, are the participants in the economy who are best
situated to reallocate resources to more efficient uses. The agency problem – the fact that
public shareholders as the (purported) “principals” who bear risk are obliged to leave the
corporate allocation of resources under the control of managers as their “agents” – poses a
constant threat to the efficient allocation of resources.

Within the shareholder-value paradigm, the stock market represents the corporate governance
institution through which the agency problem can be resolved and the efficient allocation of
the economy’s resources can be achieved. Specifically, the stock market can function as a
“market for corporate control” that enables shareholders to “disgorge” – to use Michael
Jensen’s evocative term -- the “free cash flow”. As Jensen (1986, 323), a leading academic
proponent of maximizing shareholder value, put it in a seminal 1986 article:

Free cash flow is cash flow in excess of that required to fund all projects that have
positive net present values when discounted at the relevant cost of capital. Conflicts
of interest between shareholders and managers over payout policies are especially
severe when the organization generates substantial free cash flow. The problem is
how to motivate managers to disgorge the cash rather than investing it at below cost
or wasting it on organization inefficiencies.


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Lazonick: The Quest of Shareholder Value
How can those managers who control the allocation of corporate resources be motivated, or
coerced, to distribute cash to shareholders? If a company does not maximize shareholder
value, shareholders can sell their shares and reallocate the proceeds to what they deem to be
more efficient uses. The sale of shares depresses that company’s stock price, which in turn
facilitates a takeover by shareholders who can put in place managers who are willing to
distribute the “free cash flow” to shareholders in the forms of higher dividends and/or stock
repurchases. Better yet, as Jensen (1986, 324) argued in the midst of the 1980s corporate
takeover movement, let corporate raiders use the market for corporate control for debt-
financed takeovers, thus enabling shareholders to transform their corporate equities into
corporate bonds. Corporate managers would then be “bonded” to distribute the “free cash
flow” in the form of interest rather than dividends. Additionally, as Jensen and Murphy
(1990), among others, contended, the maximization of shareholder value could be achieved
by giving corporate managers stock-based compensation, such as stock options, to align their
own self-interests with those of shareholders. Then, even without the threat of a takeover,
these managers would have a personal incentive to maximize shareholder value by investing
corporate revenues only in those “projects that have positive net present values when
discounted at the relevant cost of capital” (Jensen 1986, 323), and distributing the remainder
of corporate revenues to shareholders in the forms of dividends and/or stock repurchases.


3. A Critique of the Shareholder-Value Perspective

During the 1980s and 1990s “maximizing shareholder value” became the dominant ideology
for corporate governance in the United States, and, through a variety of institutional
channels, gained acceptance around the world. Top managers of US industrial corporations
became ardent advocates of this perspective; quite apart from their ideological
predispositions, the reality of their stock-based compensation inured them to “maximizing
shareholder value” (Lazonick and O’Sullivan 2000a). According to one study, the value of
stock options accounted for 19 percent of CEO compensation in large US corporations in
1980, but 48 percent in 1994 (Hall and Leibman 1998, 661). A more recent study of CEO
remuneration in S&P 500 companies found that average compensation in 2003 dollars rose
from $3.5 million in 1992 to a peak of $14.8 million in 2000, declining to $8.7 million in
2003 (Jensen et al. 2005, 33). The value of stock options accounted for 28 percent of this
pay in 1992, 49 percent in 2000, and 38 percent in 2003. Of the change in pay from 1992 to
2000, 10.5 percent came from salaries, 15.4 percent from bonuses, and 56.7 percent from
stock options. Of the decline in pay from 2000 to 2003, 14.1 percent came from salaries,
11.2 percent from bonuses, and 65.0 percent from stock options. It has been estimated that,
largely as a result of gains from the exercise of stock options, the ratio of the pay of CEOs of
major US corporations to that of the average worker increased from 42:1 in 1980 to 85:1 in
1990 to 531:1 in 2000 (see Dash 2006). Notwithstanding the less ebullient stock markets that
prevailed in the first half of the 2000s, this ratio stood at 411:1 in 2005 and 364:1 in 2006.1

The long stock market boom of the 1980s and 1990s combined with the remuneration
decisions of corporate boards to create this bonanza for corporate executives. During the

1 http://www.aflcio.org/corporatewatch/paywatch/pay/index.cfm;
http://www.aflcio.org/issues/jobseconomy/ceopay.cfm.

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Lazonick: The Quest of Shareholder Value
decade of the 1970s the stock market had languished, and inflation had eroded dividend
yields. In the 1980s and 1990s, however, high real yields on corporate stock characterized
the US corporate economy. As can be seen in Table 1, these high yields came mainly from
stock-price appreciation as distinct from dividends yields, which were low in the 1990s
despite high payout ratios. The form of yield is important to the mode of shareholding. A
dividend yield provides the shareholder with an income by holding the stock, and hence
promotes stable shareholding. A price yield, in contrast, can only be reaped if the
shareholder sells his or her stock. When executives, or any other employees, exercise their
stock options, they have an interest in selling the stock thus acquired to lock in the market
gains (otherwise, unless they are at the end of the typical ten-year exercise period, they
would have delayed the exercise of the options). High price yields and high levels of income
from stock-based compensation go hand in hand.

Table 1. US corporate stock and bond yields, 1960-2007

Average annual percent change

1960-1969 1970-1979 1980-1989 1990-1999 2000-2007
Real stock yield
6.63
-1.66
11.67
15.01
0.96
Price
yield
5.80 1.35 12.91 15.54 2.09



Dividend
yield 3.19 4.08 4.32 2.47 1.64
Change in CPI
2.36
7.09
5.55
3.00
2.77
Real
bond
yield 2.65 1.14 5.79 4.72 3.42
Notes: Stock yields are for Standard and Poor’s composite index of 500 US corporate stocks (about 75% of which are
NYSE). Bond yields are for Moody’s Aaa-rated US corporate bonds.
Source: Updated from Lazonick and O’Sullivan 2000a, using US Congress 2008, Tables B-62, B-73, B-95, B-196.

It should be noted that, as a whole, US corporations were not skimping on dividends in the
1980s and 1990s. It is simply that when a company’s stock price increases, its dividend yield
– the amount of dividends paid out as a percentage of the stock price – will fall unless the
amount of dividends increases proportionately. In the 1980s dividends paid out by US
corporations increased by an annual average of 10.8 percent while after-tax corporate profits
increased by an annual average of 8.7 percent. In the 1990s these figures were 8.0 percent
for dividends (including an absolute decline in dividends of 4.0 percent in 1999, the first
decline since 1975) and 8.1 percent for profits. The payout ratio – the amount of dividends
as a percentage of after-tax corporate profits (with inventory evaluation and capital
consumption adjustments) – averaged 48.4 percent in the 1980s and 56.5 percent in the 1990s
compared with 38.8 percent in the 1960s and 41.3 percent in the 1970s. In 2000-2006 the
payout ratio was 61.7 percent, and for the first three quarters of 2007 it was at an all-time
high of 69.2 percent (US Congress 2008, B-90).

High stock yields reflected a combination of three distinct forces at work in the US corporate
economy in the 1980s and 1990s: a) redistribution of corporate revenues from labor incomes
to capital incomes, especially by older corporations, through a combination of downsizing of
the labor force and increased distributions to shareholders in the forms of cash dividends and
stock repurchases; b) innovation, especially by newer technology companies, that boosted
earnings per share; and c) speculation by stock market investors, encouraged, initially at
least, by stock price increases due to the combination of redistribution and innovation. An
understanding of these three determinants of stock-price movements is essential for a critical

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Lazonick: The Quest of Shareholder Value
evaluation of the claim that “maximizing shareholder value” results in superior economic
performance.

Firstly, in the 1980s and 1990s older companies, many with their origins in the late 19th
century, engaged in a process of redistributing corporate revenues from labor incomes to
capital incomes. Engaging in a “downsize-and-distribute” allocation regime, these
companies downsized their labor forces and increased the distribution of corporate revenues
to shareholders (Lazonick and O’Sullivan 2000a). As indicated earlier, this allocation regime
represented a reversal of the “retain-and-reinvest” regime that had characterized these
companies in the post-World War II decades; they had retained corporate revenues for
reinvestment in organization and technology, expanding their labor forces in the process.
Coming into the 1980s employees – both managerial personnel and shop-floor workers -- had
expectations, based on over three decades of experience of “retain-and-reinvest”, of long-
term employment with these corporations (Lazonick 2004 and 2007a). Downsizing
augmented the so-called “free cash flow” that could be distributed to shareholders. In the
early and mid-1980s, this redistribution of corporate revenues often occurred through debt-
financed hostile takeovers, favored by the proponents of the “market for corporate control”.
Post-takeover downsizing facilitated the servicing and retirement of the massive debt that a
company had taken on (Shleifer and Summers 1988; Blair 1993).

From the mid-1980s the distribution of corporate revenues to shareholders increasingly took
the form of corporate stock repurchases. As shown in Figure 1, in every year from 1994
through 2007 net equity issues of nonfinancial business corporations as well as commercial
banks and insurance companies taken as a group were negative. In the Internet boom years
of 1997-2000, the extent of this “negative cash function” of the stock market increased
markedly as many companies sought to use repurchases to augment the positive impact of
stock-market speculation on stock prices. Measured in 2007 dollars, net equity issues for
nonfinancial corporations, banks, and insurers combined bottomed at -$300 billion in 1998
before rising to -$49 billion in 2003, the highest level in real terms since 1991. Since then,
however, net equity issues have reached unprecedented levels, plunging to -$143 billion in
2004, -$412 billion in 2005, -$672 billion in 2006, and -$896 billion in 2007 (see Figure 1).

This “disgorging” of the corporate cash flow manifests a decisive triumph of agency theory
and its shareholder-value ideology in the determination of corporate resource allocation.
Later, we shall look directly at the role of stock buybacks among the companies included in
the S&P 500 Index in driving these massive distributions to shareholders. And then, by
considering the cases of particular companies in particular industries, I shall raise the
question of whether the cash flow that has thus been disgorged has really been “free”.


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Lazonick: The Quest of Shareholder Value
Figure 1. Net corporate equity issues (billions of 2007 dollars) in the United States by non-
financial corporate business and by selected financial sectors, 1980-2007
100
0
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
198
198
198
198
198
198
198
198
198
198
199
199
199
199
199
199
199
199
199
199
200
200
200
200
200
200
200
200
-100
-200
s -300
lion
-400
7$ bil
200 -500
-600
-700
-800
-900
Nonfinancial business corporations
Banks and insurance companies


Source: Board of Governors of the Federal Reserve System, 2008.

Secondly, by creating new value, innovation boosted a company’s stock price. In contrast,
by definition, redistribution transfers value from labor incomes to capital incomes, raising the
stock price as, for example, workers are laid off and as wages and benefits are reduced, with
no new value being created. During the 1980s and 1990s newer technology companies such
as Intel, Microsoft, Oracle, Sun Microsystems, and Cisco Systems experienced significant
growth in both revenues and employment by means of a “retain-and-reinvest” allocation
regime; they retained corporate revenues, paying little if any dividends (although most of
them did some stock repurchases during the 1990s), and reinvested earnings in innovative
products and processes. In general, both the revenues and employment levels of these
companies grew over this period, especially during the 1990s, and these companies were
highly profitable (see Lazonick 2006a). Steadily rising stock prices reflected the realization
of the gains of innovative enterprise by these companies.

Thirdly, sophisticated stock market investors recognized that the combination of
redistribution and innovation provided a real foundation for stock price increases, and
speculated on further upward movements. Other less knowledgeable investors followed suit.
From the fourth quarter of 1985 to the third quarter of 1987, and then more significantly from
the first quarter of 1995 to the third quarter of 2000, speculation became an increasingly
important factor in the rise of stock prices. Professional insiders, within corporations and on
Wall Street, encouraged and generally gained from this speculation because of the existence
of a long queue of unprofessional outsiders who bought shares at inflated prices, implicitly

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Lazonick: The Quest of Shareholder Value
assuming that “greater fools” than themselves remained ready to buy the over-priced shares
on the market. At some point, however, the “greatest fools” were left holding these shares, as
happened in the fourth quarter of 1987 and, more profoundly, from the fourth quarter of 2000
when stock prices fell precipitously. With the continued fall in stock prices in 2001, the
speculation that helped to sustain the longest “bull run” in US stock market history was put to
rest.

The “behavioral” school in financial economics has recognized the importance of stock
market speculation as a determinant of stock prices, but has not in general embraced the
“greater fools” perspective. For example, in a best-selling book published at the height of the
Internet boom, financial economist Robert Shiller (2000) characterized the stock market
bubble as “irrational exuberance”. Shiller (2000, 18) made the assumption that all players on
the stock market, professionals and non-professionals, have access to the same information,
implying that irrational exuberance is a general phenomenon among stock-market investors.
Yet the assumption is contradicted by widespread use of inside information by professionals,
as revealed in stock-fraud investigations in the aftermath of the Internet crash as well as in
documents produced in numerous class action lawsuits by shareholders who bought shares
and allegedly lost money because of false information provided by professional insiders.
Investigations by the Securities and Exchange Commission have revealed the widespread
corporate practices of backdating executive stock option awards to dates at which prices were
lower and granting stock options to executives just ahead of “good news” announcements
that could be expected to boost the company’s stock price, both of which served to increase
the gains of corporate executives from stock options (Lie 2005; Forelle and Bandler 2006;
Fried 2008b). Insofar as insiders have the incentive and ability to manipulate stock market
prices in these ways for their own personal gain, their exuberance is anything but “irrational”.

Under the heading, “Cultural Changes Favoring Business Success or the Appearance
Thereof,” Shiller (2000, 22-24) recognized, but in my view understated, the incentive that top
corporate executives, as the ultimate professional insiders, had to contribute to that
speculation, given the importance of stock-based compensation to their pay packages.
Ironically, after the crash, Michael Jensen, a leading academic proponent in the 1980s and
1990s of using stock-based compensation to align the interests of managers with shareholders
(Jensen and Murphy 1990), chastised corporate executives for failing to say “no” to Wall
Street, as, spurred on by the prospect of greater stock-based compensation, they had taken
actions during the boom for the purpose of inflating stock prices (Fuller and Jensen 2002).
Corporate insiders had much to gain, moreover, from the volatile stock market, not only as
prices rose but also as they fell; while the outsiders continued to buy, the insiders sold (see
for example, Gimein et al. 2002).

Especially in high-tech companies, it was not only top executives who stood to gain from an
ebullient stock market. During the 1980s and 1990s growing numbers of employees acquired
a direct interest in stock price increases as corporate stock became increasingly important as
a mode of compensation. From the late 1930s US corporations had granted stock options to
top executives, primarily to give them access to a form of compensation that would be taxed
at the low capital-gains rate (Lazonick 2003a). From the 1960s, however, high-tech startups
based in what would become known as Silicon Valley began to use stock options to lure
technical and administrative personnel away from secure careers with established companies,

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Lazonick: The Quest of Shareholder Value
and subsequently to compete for these employees among themselves. By the 1980s and
1990s broad-based employee stock option plans had become widespread among newer
technology companies, and in the late 1990s diffused to many older corporations, not only in
the United States but also abroad, that competed for this highly mobile labor (Carpenter et al.
2003; Glimstedt et al. 2006). While top executives continued to get highly disproportionate
shares of the stock options that a company allocated, a broad base of the high-tech labor
force, especially in high-tech industries, acquired an interest in corporate policies aimed at
“maximizing shareholder value”.

But did this financial behavior lead to a more efficient allocation of resources in the
economy, as the shareholder-value proponents claim? There are a number of flaws in agency
theory’s analysis of the relation between corporate governance and economic performance.
These flaws have to do with a) a failure to explain how, historically, corporations came to
control the allocation of significant amounts of the economy’s resources; b) the measure of
“free cash flow”; and c) the claim that only shareholders have “residual claimant” status.
These flaws stem from the fact that agency theory, like the neoclassical theory of the market
economy in which it is rooted, lacks a theory of innovative enterprise. These flaws are,
moreover, amply exposed by the history of the industrial corporation in the United States, the
national context in which agency theory evolved and in which it is thought to be most
applicable.

Firstly, agency theory makes an argument for taking resources out of the control of
inefficient managers without explaining how, historically, these corporations came to possess
the vast amounts of resources over which these managers could exercise allocative control.
From the first decades of the 20th century, the separation of share ownership from
managerial control characterized US industrial corporations (Berle and Means 1932). This
separation occurred because the growth of innovative companies demanded that control over
the strategic allocation of resources to transform technologies and access new markets be
placed in the hands of salaried professionals who understood the investment requirements of
the particular lines of business in which the enterprise competed. At the same time, the
listing of a company on a public stock exchange enabled the original owner-entrepreneurs to
sell their stock to the shareholding public, and, enriched, to retire from their positions as top
executives. The departing owner-entrepreneurs left control in the hands of senior salaried
professionals, most of whom they had recruited decades earlier to help to build their
enterprises. The resultant disappearance of family owners in positions of strategic control
enabled the younger generation of salaried professionals to view the particular corporations
that employed them as ones in which, through dedicated work effort over the course of a
career, they could potentially rise to the ranks of top management.

With salaried managers exercising strategic control, innovative managerial corporations
emerged as dominant in their industries during the first decades of the century (Chandler
1977 and 1990). During the post-World War II decades, and especially during the 1960s
conglomerate movement, however, many of these industrial corporations grew to be too big
to be managed effectively (Lazonick 2004). Top managers responsible for corporate
resource allocation became segmented, behaviorally and cognitively, from the organizations
that would have to implement these strategies. Behaviorally, they came to see themselves as
occupants of the corporate throne rather than as members of the corporate organization, and

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