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The American business model – does it work?

On first sight it may seem cheeky for a European to question the effectiveness of American businesses. The USA has the largest economy in the world, many of the largest and most profitable companies, and currently better growth performance and higher rates of employment than most other advanced economies.

But there are criticisms:

  • Short termism. Do senior managers in American businesses act in the best long term interests of the shareholders?  Or are they overly concerned with the next quarter?
  • Income disparity. Is it in the long term interests of the company and by extension of the country, for Chief Executives to be paid many hundreds of times more than the average, let alone the lowest paid workers?
  • And the key one for this discussion- is it right that so many American businesses have the role of Chairman/President and CEO vested in the same individual?

The evidence is mounting in favour of more separation of roles. The combined role works when it works but too often it doesn’t. Research by Bloomberg suggests that companies with below average performance benefit from separating the roles.

 

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