The Big Idea

The Age of Customer Capitalism
For three decades, executives have made maximizing shareholder value their top priority. But evidence suggests that shareholders actually do better when firms put the customer first. by Roger Martin

58 Harvard Business Review January–February 2010

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Roger Martin (martin@ rotman.utoronto.ca) is the dean of the Rotman School of Management at the University of Toronto.

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ILLUSTRATION: GEORGE BATES

odern capitalism can be broken down into two major eras. The first, managerial capitalism, began in 1932 and was defined by the then radical notion that firms ought to have professional management. The second, shareholder value capitalism, began in 1976. Its governing premise is that the purpose of every corporation should be to maximize shareholders’ wealth. If firms pursue this goal, the thinking goes, both shareholders and society will benefit. This is a tragically flawed premise, and it is time we abandoned it and made the shift to a third era: customer-driven capitalism.

January–February 2010 Harvard Business Review 59

THE BIG IDEA THE AGE OF CUSTOMER CAPITALISM

TWO MILESTONES IN MANAGEMENT

In 1932, Adolf A. Berle (above) and Gardiner C. Means published their treatise The Modern Corporation and Private Property, endorsing the revolutionary idea that owners ought to turn companies over to professional managers.

After Michael C. Jensen and William H. Meckling published “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” in the Journal of Financial Economics in 1976, “maximizing shareholder value” became the new corporate mantra.

The first two eras were both heralded by an influential academic work. In 1932, Adolf A. Berle and Gardiner C. Means published their legendary treatise, The Modern Corporation and Private Property, which asserted that management should be