Wednesday, January 21, 2004

Is our difficulty that investors are unaware of what CAN be done?

Thanks to all for thought-provoking materials.

Let me summarise where I think we are:

1) Systems thinkers, since the 1940s, have done excellent work on understanding control systems, in a generic manner which also applies to human organisations and their management.

2) The advent of very cheap computing power means that system thinking could now be applied to create organisations which have a new and more humane principle of cohesion, instead of the traditional "glue" of obedience to group norms and authority.

3) Because of the tribalism which afflicts us all, systems thinking gets broken up into fragments whenever anyone threatens to do anything real with it. As Bill has pointed out, systems thinkers are allowed to do "blue sky" stuff, but whenever they reach ground level, they threaten someone's territory, so they are made very unwelcome.

4) All of these factors conspire to leave investors in ignorance of what is actually possible. They allow themselves to be tricked into believing that there is some magical quality to the self-congratulatory elite who sit on the boards of big corporations, and that they are therefore entitled to pay each other vast sums of money, which are apparently never as much as they deserve, while remaining unaccountable for their actions.

5) With the technology and expertise at our disposal, we could rapidly and inexpensively demonstrate what we are talking about (as per my posting "Using computers to provide audit trails"), but it is hard to gain permission to do so, because it would demonstrate that the board-room emperor has no clothes.

6) SOX reads very well, and its full-blooded implementation would really change things. However, having been frightened out of their wits for a while, I believe that management are now feeling more relaxed. This is because they can see that the US government has no real intention of doing anything, as shown by Bush's slashing of the SEC budget by $200 million and the fact that so many of his "friends" would be hurt by SOX 404, if it was taken seriously.

My view is that, until the next US scandal breaks out (which it undoubtedly will), SOX 404 is a paper tiger.Unless a democratic contender emerges who seriously challenges Bush on his record in this area, and gets elected, we can expect more of the same, until something very big blows up.

So my question is: Can we get the message across of what can REALLY be done, and get someone, somewhere, to give us permission to do a real job, and demonstrate that this stuff works?

Once it is demonstrated, and investors start to realise the power of this approach, the pressure to change will be on, and Business As Usual will be on the run. However, this involves a very big paradigm shift and there are lots of vested interests who don't want to see it!