Unit 6 - Davis 2009

K-corporation

Q1: What is the main argument in Gerald Davis’s Managed by the Markets?

A: That financial markets have become the dominant force in shaping organizations and society, replacing traditional corporate and government control.

Q2: What does "financialization" mean according to Davis?

A: The increasing influence of financial markets, investors, and stock prices on organizational decision-making and everyday life.

Q3: What is meant by "market governance"?

A: Firms are managed and disciplined not by internal hierarchies but by market mechanisms like stock prices, credit ratings, and investor pressure.

Q4: What is the role of "shareholder value" in Davis’s framework?

A: Maximizing shareholder value becomes the central goal of the corporation, often above employee welfare or long-term planning.This focus leads to prioritizing short-term profits and stock performance over sustainable growth and ethical considerations.

Q5: What are two major consequences of financialization for workers?

A: Job insecurity and outsourcing, as companies reduce costs to please investors and boost share prices.

Q6: How has financialization changed the structure of corporations?

A: Many firms now outsource production and focus on core financial metrics, leading to leaner, more fragmented corporate structures.

Q7: What institutions gained power under financialization?

A: Investors, hedge funds, credit rating agencies, and stock exchanges.

Q8: What is a disadvantage of market governance?

A: It prioritizes short-term gains and can make firms fragile, reactive, and disconnected from long-term social value.

How does Apple illustrate Gerald Davis’s concept of financialization?

It prioritizes shareholder value through stock buybacks and outsourcing, governed by financial markets.

Why are credit rating agencies powerful under market governance?

They influence access to capital and shape firm and even government behavior.

What is short-termism and how does it affect workers and long-term growth?

It prioritizes quick financial returns, leading to layoffs and reduced investment in innovation or stability.

How did GE and IBM restructure under financial market pressure?

They downsized and focused on shareholder returns, even at the expense of long-term capabilities.