Page 258 - The Drucker Lectures

The Future of the Corporation II [ 239

at Harvard have never heard of mine.
The importance of a balanced scorecard is not the individual
items. The importance is that it forces you in management to
look at the institution from different angles.
Now the fashion is to look at quarterly earnings only. But go
back to the 1950s, when General Electric brought in Ralph Cor-
diner as CEO. He reorganized GE, and tried to think through
how to measure its results. And Cordiner basically operated on
the assumption that shareholders didn’t matter. This was the
realistic assumption since the famous book The Modern Cor-
poration and Private Property [published in 1932] by Gardiner
Means, which pointed out that shareholding had become totally
dispersed, and no shareholder really gave a hoot about the com-
pany. If he didn’t like it, he sold his 100 shares.
This was the prevailing belief—and reality—up until very
recently, up until the rise of the pension funds over the last 10
years or so. Now, if you’re a pension fund like CalPERS [the
California Public Employees’ Retirement System], your hold-
ings are so enormous that you can’t sell. You’re stuck. Then you
have to take an interest. Then you have to act like an owner.
And having these big institutional investors owning such a
very large share of big American companies is not a good thing
because the pressure is always short term. I’ve seen more mis-
takes being made so that the stock will be up five points or what
have you. And I think that this is a very real danger.

From a lecture given at Claremont Graduate University.