It is through the shareholder that society sanctions what the company wishes to do. Society says, “Yes, you may do that,” when money is invested in a company. Perhaps the principal difference between a free and socialist economy is the mechanism by which this social assent or commitment is made. In a controlled economy, a central authority says, “Yes, you may come into business, you may start production on that.” But in a free economy there is a much more sensitive, a much more subtle medium by which society gives its consent. The stock exchange is an extremely sensitive instrument by which society is constantly making judgments on what is occurring in the industrial and commercial world. Wall Street may not be a very good judge if “good” means having high ethical standards, but it is an extremely sensitive judge. It is very quick to register approval or disapproval for changes within a company and within society at large.
The market, through the purchase of products, also gives assent to a company. The assent of a shareholder is, “Yes, you may do that.” The assent that the market gives is, “Yes you may do that, and with this result, or for this reason.” The employee also gives assent when he says, “Yes, you may do this, and this is how it will be done. This is the quality it will be given.”
It can be seen, therefore, that the market answers “why” in a company. The organizational structure of a company must conform to the market it has to serve–that is, to the product it has to produce. The employees answer the “how” in a company. The organizational process of a company must conform to the abilities of the employees. The shareholders say that a company will be. The interaction of these three gives rise to a system, as set of independent but mutually related terms. The shareholder, the market, and the employee are independent role systems, but they are mutually related. They exist as independent elements of a single unified will that emerges from the common will to be. A company is therefore a unity, a whole; but it is a composite and multidimensional whole being the interaction of three forces.
March 2nd, 2020 ~The second paragraph lays out what is known as the triangle. In the model laid out by the author, each side of the triangle is equally important: shareholder, employee and market. Each has their say. Obviously, in today’s market, the shareholder usually has most of the power. Profit is king. Once in a while, the employee has increased say. The customer sometimes has some say. But it is money that has an elevated influence, and those with it yield that power. We will learn more as the book progresses.