Managerial capitalism ascended during the century's middle decades. "The decisions they made often affected the lives of thousands of people, yet they were seemingly accountable to no one." The large holdings of institutional investors and the growth of indexing as a major investment strategy have prevented the ready selling of underperforming companies; investors are now more likely to "speak out than to cash out." Whereas managerial capitalism tolerated a host of company objectives, Useem argues that under investor capitalism enhancing shareholder value has become paramount.

According to Useem, the struggle for corporate control is no longer "just another squabble among the rich and powerful," since most Americans now "derive a substantial fraction of their current or future livelihood from the performance of companies whose stock they directly or indirectly own through pension funds and mutual funds." Critical to the book's many informative insights are a series of interviews the author conducted between 1991 and 1995 with a wide array of corporate and investor executives. The result, is a rare behind the scenes look at how "investor capitalism" is reshaping the corporation.

The dismissals of top executives at GM, Digital, IBM, Kodak, Kmart, and others were only the "most visible edge of a more widespread development." "Shareholders can replace directors, directors can replace managers, and managers in turn can replace shareholders." Each party is now on a more equal footing. Institutional investors put out their Focus List but corporations now use their investor relations staff to hold "shareholder mix" campaigns. Such campaigns usually seek to increase the holdings of employees and individual investors with modest holdings.

Yet, for all the changes increasing the voice of institutional investors, only 6% of 375 major firms surveyed in 1992 received a single director nomination from an institutional investor. Another study cited by Useem shows that "directors' careers bear little or no relationship to their performance on behalf of shareholders."

The book contains a wealth of information and behind the scenes examples. Useem's description of an executive's frustration with pension fund managers in comparison with mutual fund managers is particularly interesting. "Mutual fund managers pay more attention to strategic directions, product performance, and prospective risks. Strong pension managers, by contrast, seem more preoccupied with the formalities of governance." For the CEO the "challenging--and useful--questions lay in product strategy rather than broad policy." This guided how he allocated his time. However, with the average mutual fund turning over their stock every 6 months, instead of once every 7.5 years for the average public pension fund, I have to wonder if the vision of this and similar CEOs might be just a little short sighted, especially given the importance that "corporate governance" issues may play as money moves more widely abroad.

Useem points to the recent dramatic increases in the global market. Capitalization of the Hong Kong market, for example, went from $74 billion in 1988 to $385 billion in 1993. Prior to 1990, 20% or less of new equity investments went to foreign stocks; by the beginning of 1994 that was up to 40%. These investments have displaced the investments of the World Bank, national governments and private creditors as the largest source of external financing. International bodies are harmonizing accounting and securities standards. The Department of Labor requires pension fund managers to cast informed proxy votes with the same diligence as in the U.S. CalPERS has announced a program to expand international holdings from 13% to 20% of its assets. Convergence is seen as a major theme.

Convergence is also carried over when Useem brings the split between corporate and money managers down to the personal level. Company executives see each other at the Business Roundtable, Committee for Economic Development and Bohemian Grove. "They frequent the same clubs, sometimes the same schools, occasionally the same islands." Those presiding over public pension funds and investment companies, however, remain remote from the "higher reaches of traditional business community." Their networks instead lead to such professional circuits as the New York Society of Securities Analysts and the Association for Investment Management and Research. For Useem, as a professor at the most highly rated business school in the country, the M.B.A., as the "credential of choice for movement into top management at both large firms and large investors," will result in "two years of shared training...each of the two sides will have a lingering appreciation for the concerns and challenges of the other."

The strength of Investor Capitalism lies in its vivid descriptions of personal communications derived from dozens of interviews and Useem's unique ability to draw on a large number of surveys from other reputable sources. While personal relations will be critical to building the next stage of development, it is also important to examine the process constraints within the current system which shape our everyday behavior.

For example, open-ended mutual funds have liquidity problems which discourage "ownership" and long-term holding. Section 16(b) of the Securities Exchange Act of 1934 requires shareholders with 10% or more of a stock to return short-swing profits, even if the trading was done without inside information. Most pension funds exist in a culture of "blame avoidance" built around the legal concept of "prudence." Although portfolio theorists generally agree that 99% of the risk management value of diversification can be achieved with a portfolio of only 100 stocks, pension plans continue to over diversify. Congress and/or the Securities and Exchange Commission could provide mechanisms for hybrid "relational" type mutual funds by allowing funds to require some notification prior to withdrawal and by adjusting 16(b) requirements. Congress and/or the Department of Labor could clarify that prudence, under ERISA, is to be evaluated on a portfolio-wide, rather than individual investment basis. The mutual cooperation between long-term owners and corporate executives which Useem envisions appears unlikely to be fully realized, regardless of the benefits of shared educational experiences, unless such structural reforms are made.

Useem notes that "when U.S. company executives describe the relations they have established with investors, few cite other company experiences and none allude to non-U.S. models." He concludes that "companies have, of necessity, invented their own solutions to the problems of managing a far more concentrated yet still remarkably diverse ownership base." The increasing use of books such as Michael Useem's Investor Capitalism, Monks and Minow's Watching the Watchers, Mark Roe's Strong Managers, Weak Owners, and Margaret Blair's Ownership and Control in MBA programs should go a long way, both in reducing the need of company executives to continually reinvent emerging solutions to problems in the area of corporate governance and in furthering their dialogue with shareholders.

James McRitchie is the editor of Corporate Governance, http://www.wp.com.corpgov

In this book, Mike Useem describes nine situations in which leadership emerges. The situations outlined are very diverse, including a mountainclimbing expedition, a pharmaceutical company's decision, a firefighter's dillemma, and a Central American emerging democracy's negotiation with terrorism, to name a few. Roughly half of the stories are cases of success, half are failures, which makes it interesting exploration of both sides of the coin.

Overall, the stories are very interesting per se, and worth the read. Some of these are classics of management and ethics, such as the Merck Riverblindness case. At the end of each story, Useem tries to do an analysis of what the leader did right or wrong. In this section, I did in fact disagree with some of Useem's conclusions, and what bothered me was the fact that I felt like the author did not leave enough space for alternative views. For example, he argues that Roy Vagelos of Merck was a great leader because he guided his company to do the right thing and spend all the money on the disease though it would not recoup costs. I would argue that he did recoup, by the free publicity, which Useem helps extend, but Useem never mentions the possibility of it being worth it.

I did like the book and would recommend it, especially the stories, which are told in a very fast paced and easy to read manner. However, not so sure about the analysis.

This book by Michael Useem was the first book I tackled in my MBA class on current managegemt theory. It fullfilled my need to research leadership, and captivated my subconscious mind as well. Everyday that has since passed has presented many opportunities for recall from one of the nine impactful stories on leadership.

This book teaches one how to be prepared to be a leader when the opportunity presents itself. The subject of vision, a necessary tool for individual and corporate leadership, is so completely incorporated in the first story of Roy Vagelos and Merck that the reader will never find the topic of vision as a pie-in-the-sky theoretical corporate gimmick without deep-seated attachment to core values again.

Searching for a book on leadership for a graduate level management class, I came across this title and was fascinated. If you are going to read one book on leadership, it should be this book. Michael Useem has written an amazing book in which he shares the stories of nine leaders and the decisions they made in leadership moments. Within each chapter the true story is explained, followed by implications noting the leadership skills applied to make the decision that was made in each case.

This book is just a collection of somewhat amusing anecdotes, with off-the-cuff musings about what these anecdotes might mean. This type of book is generally not useful, because there is no way to tell whether the anecdotes are accurate and certainly no validation of the tatke-aways. The only time they are useful is when the author happens to be unusually perceptive and insightful - unfortunately, this author is unusually not-perceptive and not insightful at all. Bad book.

Leaders are not just bosses. In fact, some of the most effective leaders in an organization may be those leading the boss! Leading up is about helping your superiors lead and do their job better. Everyone can lead up. Even if you are a CEO you will need to lead your board and stockholders.

Michael Useem, the author of Leading Up, is professor of management and the director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania. His writing style uses detailed cases from military history, politics, business and even stories of Biblical figures to emphasize the need to lead up. I found some of the stories a bit long and detailed, going beyond what some readers might desire in order to grasp the point being made. However, if you enjoy this presentation style, the cases are well written and provide fascinating insights into actual historical events.

Professor Useem says that business has often looked to the military model for lessons in leadership "because of the seemingly impervious top-down authority system." Using actual military stories, the author demonstrates that the military model can also offer invaluable lessons that are just the opposite. Encouraging your subordinates to say what is positive or negative about a plan before you impose an order can often avoid costly errors, or even save lives. Creating a culture that stimulates and rewards upward leadership is critical in today's complex environment where no single individual can possibly have all the answers. Useem says, "The military might appear to be the last place on earth where upward leadership is tolerated, but in fact such leadership is obligatory." Encouraging upward challenges can keep a leader on course regarding adherence to principles.

The book also forcefully demonstrates that redefining an institution's reality is one of the greatest tests of leading up. Changing well-established worldviews is certainly a difficult task, but the very fact that it is so difficult underscores the "overriding importance of achieving it." Often the redefining of a superior's misplaced perceptions, or clarifying a superiors' understanding of a situation requires extraordinary steps. This is one of the greatest challenges to leading up.

Sometimes a subordinate must exercise the courage to ask the boss to elaborate and clarify inadequate instructions or an unclear strategy. Often a superior does not specifically seek this type of leading up. Nevertheless, such challenges can often make the difference between failure and success.

If you enjoy reading detailed, but interesting leadership stories, accompanied by succinct lessons in leading up, then this is a book for you. If you are looking for a quick read of principles and leadership philosophy, you will not find that in this work.

...

I was really disappointed to read several of the other reviews that felt this book was so poor. I found the style of the book to be quite helpful. The historical analysis of events were interesting and useful to me in my everyday business interactions. My company needs to be able to "Lead Up", let the boss know what is going on without fear, and "Lead Down", to bring in the ideas from all quarters of the company.

Our company is currently in crisis and the book is giving me ideas about how to get inforamtion and ideas up and down the chain of command. There is nothing worse than the image of employees ideas rotting on the shelf while the business goes under. This book encouraged me to speak my mind, lead up, lead down and in general be a better leader.

The book also addresses the leadership culture that promotes leading up and leading down.

The only reason I can think that other people did not get much out of this book is that they already knew about these concepts, or they did not identify with the stories/analysis.

"Change at Work"
Cappelli, Peter (1997). Change at Work. Oxford University Press. NY
Change at Work is a commissioned study by the Committee on New American Realities that uses available information in an attempt to understand changing employment practices, changing organizations, and evolving employment relationships. The issues discussed in the book are nationwide workplace trends that have important ramifications for employees, employers, and the U. S. economy.

Change at Work is definitely a scholarly work that must be read in manageable, small portions because of the poor linking of chapters and poor data presentation. Fortunately, the final and concluding chapter of this book makes some sense out of the previous six chapters.

The editor tells us that the book was outlined by the group of authors, then individual authors took responsibility for each chapter. The editor also says "the authors made extensive comments on each others chapters along the way." (14). I have no doubt that the authors made comments on each chapter. I only wish they had taken the time to focus these comments on the transition between and the linking of the chapters and the data presentation. A consistent chapter format that used a conclusion or summary section at the end of each chapter would have facilitated the transition and linking of the chapters. This type of section at the end of each chapter could have solidified the authors' conclusions after the data purge that occurs in each chapter. Each data source pertains to a different time period and means of data collection. Some sources use percentage, while others use raw numbers. The authors do a poor job of linking the data; hence, the net effect is confusion to the reader. The authors would have made the book easier to read by using more graphical representation and detailing the significant data necessary to support their arguments.

The one strength of this book is the editor's ability to bring most of the significant findings throughout the book into a logical concluding chapter that is easy to understand and flows quite well. Each of the previous chapters is referenced directly or implicitly as the editor makes sense out of the book.

The authors are definitely working on a timely topic that most people in industry can relate to. Personally, I started working for my current employer, a global consumer products company, a year or two after they went through a large downsizing period. Since employment, I have seen this trend continue in the supervisory level. This is in alignment with the authors data that shows the percentage of supervisory jobs eliminated doubling in four years. My company is not currently going through a large organized downsizing, but rather a slow downsizing through attrition and hiring fewer people. The flattening of my company, coupled with the implementation of high performance work systems has undoubtedly placed the results of doing business on the employees. The book dedicates an entire chapter to these work organizations and the responsibilities that they bring to the employees.

The book describes the changes and brings supporting data, but the authors do not give any significant conclusions or forecasts and does not present the data in a way that the reader can draw his or her own conclusions. The lack of conclusions or forecasts and the poor linking of the chapters leave the experienced reader, someone who has been through downsizing and is involved in high performance work groups, no better off than he or she was before.

Change at Work is a must read for high-school students, college students, and those seeking careers in management. Cappelli has a no nonsense approach with detailing those issues impacting our careers, the work environment, and the future. For those wondering if a technical or college education is worthwhile, Cappelli gives you good reasons for furthering your education. Cappelli and his co-authors do an outstanding job detailing those issues and circumstances faced by today's workers and managers of all business, i.e., corporate America, government agencies and other nonprofit entities, and the smallest of ma-and-pa companies. Cappelli does not offer good solutions for any of the issues he raises in this work. Unfortunately for professionals and management already in the work force, Change at Work offers no new knowledge.

Change at Work is based on a study, commissioned by the National Planning Association's Committee on New American Realities (NAR), to evaluate and comprehend changing employment/organizational practices. The study also looked at the impacts of such changes on the employees of the companies reviewed - particularly the skills and adaptation needed to weather this storm. Change at Work is divided into six chapters, each individually authored by NAR committee members. Consequently, one of the main problems with the book is that it does not flow particularly well. The central theme of Change at Work is that the traditional methods of managing employees and developing skilled workers inside companies are eroding, leaving a new employment relationship in which the attachment between employees and employers has declined. Jobs demand more of their workers but offer them less, and these workers now bear more of the risks of doing business through reduced job security and contingent pay (pay based on performance). In addition, what Peter Cappelli calls the "traditional work arrangements," where companies developed skilled employees and worked to keep them, are quickly disappearing. Pressure on the companies for better performance is being applied from foreign competitors and investors and is causing these companies to explore restructuring to cut out "fat." This "fat" has often been interpreted to mean the companies' employees, who have found themselves to be the unfortunate victims of the now famous concept called "downsizing." The strengths of Change at Work are in the chapters contributed by Cappelli. In addition, the book contains an interesting and thorough variety of data, surveys, and other references, although some may not like their breadth or loose assembly. Unfortunately, Change at Work balances its strengths with several weaknesses. The book claims it is the result of a study, but it is actually more of a history lesson with limited background. It is also not particularly useful as a management tool, and may not even be considered interesting by most managers or employees. The book lacks a solid conclusion to the theme, with the exception that employee/employer relationships will become worse before they improve. Change at Work provides several other useless conclusions as well. Examples include the findings that employees need more skills in the new system (which begs the question-at what point throughout business evolution have employees never needed new skills?); managing these issues will be an enormous challenge; and change at work will continue. Big surprises. The variety of data sources and timeframes simply tossed together leaves the reader hoping that the authors will use them to point to some obvious conclusion or develop their own, but in the last paragraph they resign and state they are divided. The currently strong economy and low unemployment rate, albeit temporary, has given employees an opportunity to strike back in the form of being more selective, demanding better compensation packages, etc. We should not ignore the benefits of corporate restructuring as mentioned in Change at Work. Restructuring has given organizations much more flexibility in accomplishing their goals, has empowered employees, and has given them the autonomy that the traditional model could not.