Who Will Represent the Investor?
Responses to the question, "Is this the decade of the investor?" offer little hope that the investor will get any relief soon, compared to the rewards realized by managers and customers. Nor do they hold out much promise that the investor's supposed friend, the director, will come to the rescue. However, before we jump to conclusions, we are cautioned to assemble more information.
| If directors will not or cannot carry out their responsibility to represent the best interests of investors, who will? |
| — James Heskett |
Dr. B. V. Krishnamurthy pointed out that "odds are heavily stacked against (investors)," because "it is difficult to believe that board members will do anything to protect the interests of small investors." He also suggests that investors have little ability to judge whether compensation for managers is fair, particularly in an information economy in which it is difficult to assess justification for "benefits and perquisites."
But Dr. Leslie Levy suggests that before we jump to conclusions, perhaps more information is needed. In particular, we should isolate the returns to various types of employees and investors in order to assess the fairness of the division of returns. And before making assumptions about the future, "we still need to get a firm handle on just how much productivity increased before we take actions based upon assumptions of increased productivity."
If directors will not or cannot carry out their responsibility to represent the best interests of investors, who will? Will dynamics that determine flows of funds and foreign investment levels in the U.S. ultimately pose the threat of fewer funds—foreign or otherwise—to finance U.S. technology and other development, thereby forcing higher returns? Or must we suffer more severe adjustments that will ultimately reduce the pie for managers, employees, customers, and investors alike? What do you think?