Managers and Markets - A Special Relationship.

That the investment markets are the dominant influence affecting the appointments, careers, rewards and tenure of the top management of large quoted companies.

That the players in the markets have become more aggressive and domineering since "Big Bang" and the control of the London market by large and ambitious foreign-owned investment banks.
Whereas once top management saw their activities and interests as being distinct from those of investors, a much more involved and symbiotic relationship has developed between them in recent years.

Most contemporary top managers understand that catastrophic sanctions can flow from displeasing the markets. Equally, they know that great benefits can accrue from pleasing them. To do this, they employ a wide range of stratagems - from aligning their behaviour and actions to those the markets seem to want - through creating and promoting carefully crafted 'stories' - to, at the extremes, manipulation of information and outright deceit.

Thus, top managers and the main players in the financial markets have tended more and more to become part of a 'System' of connected and symbiotic interests. This system, whilst informal, is coherent and well understood by insiders, and can create huge opportunities for rewarding the players.

Because of their informality and complexity, the interrelationships between managers and the many players in and around the financial markets are invisible to outsiders and thus almost impossible to regulate. They essentially only serve the interests of insiders, who are not accountable to other stakeholders or the wider public.


In our own research, chairmen, non-executive directors, executive search consultants, investors, and brokers described in detail the elaborate soundings that are taken in the financial markets before a CEO appointment is made in a FTSE 100 company. (vii)

In Summary....

There is a mass of evidence pointing to an almost total domination of the directors of large companies by the investment markets, whose motivations, as we shall see, are seldom to do with the long-term health of companies.
The quid pro quo for managers has been the opportunity to get rich by keeping investors happy.

In Proposition Two, we shall review some extraordinary research that points to the effects of this dominance on the strategies that top managers adopt for their companies...........

(i) Financialisation and Strategy: Narrative and Numbers, Froud, Johal, Leaver and Williams. Routledge, 2006,
(ii) The Life and Times of the CEO - Harrington and Steele, 1999
(iii) The City, Tony Golding, Financial Times/Prentice Hall, 2001
(iv) In the Mirror of the Market, Roberts, Sanderson, Barker and Hendry, Judge Institute of Management and Centre for Business Research, Cambridge University, 2005.
(v) The Role of the Board in Creating a High-Performing Business, Roberts and Young, Performance and Reward Centre (PARC), 2005.
(vi) Holes at the Top: Why CEO Firings Backfire, Margarethe Wiersema, Harvard Business Review, December 2002.
(vii) Having Their Cake, Don Young and Pat Scott, Kogan Page, 2004.

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