NFL Saves American Capitalism!

NFL Saves American Capitalism!

"Maximizing shareholder value" is a losing strategy. Companies should take a page, or several, from pro football's playbook.

Directors, Public Boards
c/o Institutional Shareholder Services (ISS),
Washington, D.C.

Dear Fellow Board Members:

The Minnesota political establishment has been convulsed over how to save the NFL franchise in Minnesota. Little do they realize that the NFL is the model for saving American capitalism. This claim is made in a book you simply must read—Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL. The book is a radical, rage-against-the-machine work by a highly respected management theorist, Roger L. Martin, a double Harvard who is currently the dean of the Rotman School of Management at the University of Toronto.

Professor Martin starts his analysis of the last 10 years by examining the accounting scams of 2001–2002 as exemplified by Enron, WorldCom, Global Crossing, and a number of other companies we would all like to forget. That scandal amounted to the biggest business failure since the collapse of the savings and loan industry in 1988. Passage of the Sarbanes-Oxley Act in 2002 was supposed to save us from such collapses in the future.

Learn more about Roger L. Martin and his provocative business thinking at

But only a couple of years later, the options backdating scandal erupted, ultimately involving more than 360 U.S. publicly held companies, including one right here in River City: Minnetonka-based UnitedHealth Group. More reforms followed, and almost predictably, starting in 2007 the entire economy—on a global basis—was engulfed by the subprime mortgage crisis.

Fixing the Game reviews a number of case studies, including the positive examples of companies such as GE, Microsoft, P&G, Apple, and—surprise, surprise—the NFL. This analysis, which I must admit is cogently done, identifies the chief culprit in the rot of our capitalist system as the shift to a philosophy of maximizing shareholder value.

That is not a misprint. One of the better-known management consultants and experts, and the dean of a major MBA school to boot, has written a book suggesting that the philosophy that maximizing shareholder value has led us to economic collapse—and threatens the continued existence of American capitalism.

Delighting the consumer is, in Martin’s phrase, the “real market,” whereas increasing shareholder value is the “expectations market.” It is here that the NFL analogy is used most often: You don’t allow players to bet on the outcomes of their games. Martin makes the point that measuring companies by shareholder value and rewarding executives for increasing that value is the same as allowing them to bet on the games, with the inevitable “gaming” and illegal conduct that we have seen run rampant.

The NFL is also the model for constant tweaking of the rules to keep fans delighted, which is the regulatory mindset that we should have for our economy.

It follows from this analysis that compensating executives with shares of stock is a bad idea. If such compensation is ever advisable, executives should only be able to cash them in the years after retirement. In fact, in general, trading in the “expectations market” is to be avoided; the dean would outlaw short sales, punitively tax any short-term capital gains, and basically put hedge funds (“parasites”) out of business.

In this analysis, boards of directors should be excoriated for their obvious failures of oversight—failures that have names known to all of us: Adelphia, Global Crossing, Lehman Brothers, Enron, WorldCom, Tyco, and many others. Board members should be motivated solely by a desire for public service. Directors’ compensation and executive compensation should be based on measurements in the real market: return on assets, improvements in margin, and other measurements of consumer delight.

This book is highly thought-provoking—and, by constantly juxtaposing the dichotomy between expectations and real markets with the NFL, highly entertaining.

Finally, a small niggle. We have a large part of our economy which at least ostensibly is not driven by maximizing shareholder value (because they have no shareholders): nonprofits. Many nonprofit companies dominate large sectors of our economy, including health care delivery. The largest health care company in Minnesota is the nonprofit Blue Cross Blue Shield. Multibillion-dollar nonprofit companies like Blue Cross would seem to be perfect case studies for organizations that are built around, if not “customer delight,” at least not maximizing shareholder return. It would be interesting to hear Professor Martin’s analysis of how these entities stack up against the NFL.

In any event, Fixing the Game is an important work, and it should be now and closely read.

Vance K. Opperman
Fellow board member

Vance Opperman ( is owner and CEO of MSP Communications, which publishes Twin Cities Business.

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