Attention conservation notice: nerdish.

Marking papers about papers, sometimes one needs to read the latter. So I’ve just read Tourish, Craig & Amernic’s paper “Transformational Leadership Education and Agency Perspectives in Business School Pedagogy” (British Journal of Management 2010). Everything grim they say about transformational leadership and the cult of the rock strar CEO and the role of business schools in promoting and legitimating it is, I think, correct. What they miss is the way in which the narrative of transformational leadership is functional for the financial interests seeking to resolve the principal-agent problem in the principal’s favor.

Agency theory provides an account of how those at the top of the hierarchy control those below: from bondholder and shareholder to CEO and on down the line. It has been employed prescriptively (i.e. normatively) by advocates of financialization, such as Michael Jensen, for good reason. This line of thinking treats all of the complexity modelled by behavioral and political theories of the firm not as incorrect, but as depicting an inefficient state of affairs that can be remedied by better top-down control, with the end result being the payment of more money out to shareholders and bondholders so that they may … allocate it more efficiently (which turns out to be a really nice term for buying private jets).

Tourish et al are correct that the the transformational leadership narrative’s rhetoric of common organizational purpose conflicts with the self-interested individualism assumed by agency theory. But if “common organizational purpose” is just a code word for the interests of the princpals, then there is no contradiction. The organization is conceived as a cascade of principal-agent deals, from bondholders through the CEO all the way to phone bank operators. Like all systems of organization this has its limitations and pathologies, but it seems to be doing the job pretty well for the owners of capital.

Jensen, Michael C. 1989. “Eclipse of the public corporation.” Harvard Business Review 67(5):61-74.

Jensen, Michael C., and Kevin J. Murphy. 1990. “Performance pay and top management incentives.” Journal of Political Economy 98(2):225-64.

Tourish, Dennis, Russell Craig, and Joel Amernic. 2010. “Transformational Leadership Education and Agency Perspectives in Business School Pedagogy: A Marriage of Inconvenience?” British Journal of Management 21:s40-s59.