Charisma in History

Charisma is sometimes suggested as a source of value. Great leadership can stimulate effort. Katz and Kahn argued that leadership can provide an increment of effort. But is charismatic leadership the true source of economic growth?

The answer is no. Economists recognize that technology and capital investment are critical sources of economic growth. Charisma existed throughout history. Ramses the Great claimed to have defeated the Hittites at Kadesh and Shakespeare commemorates Henry V's victory at Agincourt as he exhorts his outnumbered army:


"This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remember'd;
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition:
And gentlemen in England now a-bed
Shall think themselves accursed they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day."

To what extent can charisma create economic value? It would seem incrementally. The major advances in economic history occurred because of innovation at the individual and firm levels. They occurred in the 19th and twentieth century, especially during the period of laissez-faire from the 19th to the early 20th century in England and America.

There were many examples of charisma throughout ancient and medieval history, but the economy did not progress. Fundamental progress is due to technological breakthrough, capital accumulation wisely administered and understanding of customer value. In countries where the state predominates, such as the Soviet Union, China, Cuba and Sweden, there has been little economic advance. Just like the medieval world (according to which it is conceptualized), socialism is an ideology of economic stagnation and decline. State capitalism is less socialistic and so sees less decline. The socialist economies that do function, such as Sweden's, do so in the context of globalized trading with market economies. Without globalization the Swedes would still be serfs in the bruks and communistic shared fields.

What is the role of charisma then? It provides interest, stimulation and incremental motivation. It is rarer in business than in the military or other walks of life. But there has been much more progress in business than in other institutions, except for science. And charisma is notably absent from scientific endeavor as well.

The Concept of Fiduciary Duty in Business Administration

Business schools have been in existence for more than a century, but they have failed to articulate a meaningful explication of the concept of fiduciary duty as it applies to managers. This omission is striking because the primary duty of management is to serve shareholders. The subject of economics, specifically information economics, has developed an attenuated image of fiduciary duty as alignment of two utility functions--that of manager or agent and that of principal or stockholder. However, the practical ramifications of such alignment are not explicit and remain a sphinx-like riddle.

Do managers owe a duty of disclosure to shareholders, and if so, what competencies are required to exercise such disclosure?

Do managers owe a duty to act in good faith toward shareholders? If so, what is the ethical make up required of managers?

Must managers be capable of explaining bad news in a balanced way? If so, what competencies are required?

Are managers expected to act on behalf of shareholders? If so, to what degree does an understanding of economics, incentives and accounting serve as a pre-requisite to competent managerial action?

How far are boards expected to go in assessing personnel standards and systems?

These questions are not asked in management courses. Nor are they answered. They are not asked in business schools at all, nor are they answered.

It is not surprising that American business has become a spectacle of bad ethics, incompetence, mismanagement and waste. Corporate boards have not been required to develop standards of competence. Little is expected of boards. Managers are compensated on the basis of stock market trends that do not reflect managerial skill.