Michael C. Jensen

Jesse Isidor Straus Professor of Business Administration, Emeritus

MICHAEL C. JENSEN, Jesse Isidor Straus Professor of Business Administration, Emeritus, joined the faculty of the Harvard Business School in 1985 founding what is now the Negotiations, Organizations and Markets Unit in the School. He joined the Monitor Company in 2000 as Managing Director of the Organizational Strategy Practice, became Senior Advisor in 2007 and as of 2009 is no longer associated with Monitor. He was LaClare Professor of Finance and Business Administration at the William E. Simon Graduate School of Business Administration, University of Rochester from 1984-1988, Professor from 1979-1984, Associate Professor from 1971-1979, and Assistant Professor from 1967-1971. He founded the Managerial Economics Research Center at the University of Rochester in 1977 and served as its Director until 1988.

Professor Jensen earned his Ph.D. in Economics, Finance, and Accounting and his M.B.A. in Finance from the University of Chicago and an A.B. degree from Macalester College. He was awarded honorary Doctor of Laws degrees, Docteur Honoris Causa, by Universite Catholique de Louvain, Louvain-la-Neuve, Belgium, July, 1991; by the University of Bern, Bern, Switzerland, December 2000; by the William E. Simon Graduate School of Business Administration, University of Rochester, Rochester, NY, June, 2001; by the University of Toronto, June 2005 and by the Georgetown University McDonough School of Business in May 2011. He was named Honoris Causa Professor by HEC Business School, Paris, France, Nov. 2006.

Professor Jensen is the author of more than 100 scientific papers, in addition to numerous articles, comments, and editorials published in the popular media on a wide range of economic, finance and business-related topics. Most of his papers are downloadable from his SSRN Author Page at: http://ssrn.com/author=9. He is author of Foundations of Organizational Strategy (Harvard University Press, 1998), and Theory of the Firm: Governance, Residual Claims, and Organizational Forms (Harvard University Press, 2000). He is editor of The Modern Theory of Corporate Finance (with Clifford W. Smith, Jr., McGraw-Hill, 1984) and Studies in the Theory of Capital Markets (Praeger Publishers, 1972). His book co-authored with Kevin Murphy and Eric Wruck, CEO Pay and What to Do About It: Restoring Integrity to Both Executive Compensation and Capital-Market Relations will be published by Harvard Business School Press in 2012.

In 1973 Professor Jensen co-founded (with Eugene Fama and Robert Merton) the Journal of Financial Economics, one of the top three scientific journals in financial economics, serving as Managing Editor from 1987 to 1997, when he became Founding Editor. From 1992 through 1998 he served on the steering committee of the Mind Brain Behavior Initiative at Harvard University (a Harvard interfaculty effort to bring together a wide range of scholars interested in understanding the limitations of the human brain and its role in generating counter-productive human behavior). In 1994 he co-founded and is currently Chairman of Social Science Electronic Publishing, Inc. (SSEP) which is devoted to the electronic publication of scientific working papers in the social sciences http://ssrn.com.. Since 2003 Jensen has been a member of the Barbados Group, a worldwide group of a dozen scholars, including philosophers, economists, psychologists, technologists, and educators to develop the ontological foundations of performance. The group’s work and that of its members is available at http://www.ssrn.com/link/Barbados-Group.html.

Jensen was awarded the 2011 Economics for Management Lecture Series ISES-Fundacion BBVA Prize in May, 2011, and awarded the Morgan Stanley-AFA 2009 Award For Excellence in Financial Economics. (Jensen selected the National Bureau of Economics Research, Harvard Business School and the U. of Rochester Simon School of Business as recipients of the $200,000 total cash grant.) In May 2009 he was awarded the Lifetime Achievement Award for Contributions to Research in the Field of Financial Intermediation by the Financial Intermediation Society. He was awarded the Drexel U. LeBow College of Business Distinguished Scholar Award for his "Outstanding Academic Contributions to Corporate Governance. He was awarded the 2007 Herber Simon Award for outstanding contributions to business research by Rajik Laszlo College, Budapest, Hungary. In March 2006 he received the Drexel U. LeBow College of Business Dean's Leadership Award in Corporate Governance. In 2004 Jensen received the Tjalling C. Koopmans EFACT Conference Award, for "extraordinary contributions to the economic sciences, and to have reached the highest standards of quality of research," and his paper The Agency Cost of Overvalued Equity and the Current State of Corporate Finance received the European Financial Management 2004 Readers Choice Best Paper Award (by vote of the readership of the EFM Journal). In 2002 he was named a Fellow of the European Corporate Governance Institute (ECGI). Dr. Jensen was elected to the American Academy of Arts and Sciences in 1996.He received the Robert F. Greenhill Award, Harvard Business School, June 1996.  In 1990, he was named "Distinguished Scholar of the Year" by the Eastern Finance Association and one of the "Year's 25 Most Fascinating Business People" by Fortune magazine. He received a 1989 McKinsey Award for his paper Eclipse of the Public Corporation, and was awarded the Joseph Coolidge Shaw, S.J. Medal by Boston College in 1984. Dr. Jensen was also awarded (with William Meckling) the Graham and Dodd Plaque given by the Financial Analysts Federation in May, 1979 for their paper Can the Corporation Survive? Dr. Jensen and his co-author, William Meckling, received the first Leo Melamed Prize for outstanding scholarship by business school teachers from the University of Chicago's Graduate School of Business in March, 1979 for their paper, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. In 1984, this paper was identified as one of the most cited items in its field and named a Citation Classic by the Institute for Scientific Information. It also received the Journal of Financial Economics All Star Paper Award, as have the following two papers: The Market For Corporate Control: The Scientific Evidence (co-authored with Richard Ruback), and Some Anomalas Evidence Regarding Market Efficiency.

Dr. Jensen has served as consultant and board member to various corporations, foundations and governmental agencies and has given expert testimony before congressional and state committees and state and federal courts. He currently serves on the Advisory Boards of ESADE Business School and the Gruter Institute for Law and Behavioral Research. He has lectured widely at seminars, meetings, conventions and educational institutions. He is Past President of the American Finance Association and the Western Economic Association International.

Professor Jensen's major research interests now include "The Ontological Laws of Human Nature", "A Positive Theory of the Normative Virtues", "Being A Leader and the Effective Exercise of Leadership: An Ontological Approach", and "The Three Foundations of a Great Personal Life, Great Leadership and a Great Company: Integrity, Authenticity, and Committed to Something Bigger than Oneself".

Read or watch an interview about Professor Jensen's life's work at:

http://ssrn.com/abstract=1699862

and

http://ssrn.com/abstract=1863994

Updated: February 15, 2012

Books

  1. Democracy in Crisis

    Citation:

    Jensen, Michael C., and William H. Meckling. "Democracy in Crisis." 1977.
  2. Theory of the Firm: Governance, Residual Claims, and Organizational Forms

    Keywords: Theory; Business Ventures;

    Citation:

    Jensen, Michael C. Theory of the Firm: Governance, Residual Claims, and Organizational Forms. Cambridge: Harvard University Press, 2000.
  3. Foundations of Organizational Strategy

    Keywords: Organizations; Strategy;

    Citation:

    Jensen, Michael C. Foundations of Organizational Strategy. Cambridge: Harvard University Press, 1998.
  4. The Modern Theory of Corporate Finance

    Keywords: Corporate Finance;

    Citation:

    Jensen, Michael C. and Clifford H. Smith Jr., eds. The Modern Theory of Corporate Finance. McGraw-Hill, 1984.
  5. Studies in the Theory of Capital Markets

    Keywords: Capital Markets; Theory;

    Citation:

    Jensen, M. C., ed. Studies in the Theory of Capital Markets. New York: Praeger, 1972.

Journal Articles

  1. Corporate Control and the Politics of Finance

    Keywords: Finance;

    Citation:

    Jensen, M. C. "Corporate Control and the Politics of Finance." Journal of Applied Corporate Finance 4, no. 2 (summer 1991): 13–33. (Abridged version forthcoming in Management Revolution: The Legacy of the Market for Corporate Control, (Harvard University Press, Forthcoming 2001).)
  2. The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems

    Keywords: System; Failure;

    Citation:

    Jensen, M. C. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems." Journal of Applied Corporate Finance 6, no. 4 (winter 1994). (Reprinted in the JACF, (winter 1994); Finanzmarkt und Portfolio Management, (January 1993); and Jensen, Theory of the Firm, (HUP, 2000) & abridged version forthcoming in Management Revolution. . ., (HUP, 2001).)
  3. Pioneers in Finance: An Interview with Michael C. Jensen - Part 1

    Keywords: Finance;

    Citation:

    Jensen, Michael C., and Ralph A. Walkling. "Pioneers in Finance: An Interview with Michael C. Jensen - Part 1." Journal of Applied Finance, no. 2 (2010).
  4. Pioneers in Finance: An Interview with Michael C. Jensen - Part 2

    Keywords: Finance;

    Citation:

    Jensen, Michael C., and Ralph A. Walkling. "Pioneers in Finance: An Interview with Michael C. Jensen - Part 2." Journal of Applied Finance, no. 2 (2010).
  5. Just Say No to Wall Street: Courageous CEOs Are Putting a Stop to the Earnings Game and We Will All Be Better Off for It

    Keywords: Management; Profit;

    Citation:

    Jensen, M. C., and Joseph Fuller. "Just Say No to Wall Street: Courageous CEOs Are Putting a Stop to the Earnings Game and We Will All Be Better Off for It." Journal of Applied Corporate Finance 14, no. 4 (winter 2002): 41–46. (Excerpts of this article can be found in the Wall Street Journal, "Manager's Journal" column as "Dare To Keep Your Stock Price Low," 12/31/01, and in the Financial Times, as "End the Myth-Making and Return to True Analysis," 1/22/02.)
  6. Corporate Budgeting Is Broken, Let's Fix It

    Keywords: Budgets and Budgeting; Corporate Finance;

    Citation:

    Jensen, M. C. "Corporate Budgeting Is Broken, Let's Fix It." Harvard Business Review 79, no. 10 (November 2001). (This paper is an executive summary of the following: "Paying People to Lie: The Truth About the Budgeting Process," Harvard NOM Research Paper No. 01-01, and HBS Working Paper No. 01-072 (April 2001).)
  7. Science, Specific Knowledge, and Total Quality Management

    Keywords: Science; Knowledge; Quality; Management;

    Citation:

    Wruck, Karen H., and Michael C. Jensen. "Science, Specific Knowledge, and Total Quality Management." Journal of Accounting & Economics 18, no. 3 (November 1994): 247–287. (Reprinted in Michael C. Jensen, Foundations of Organizational Strategy, (Harvard University Press, 1998).)
  8. The Nature of Man

    Citation:

    Jensen, Michael C., and William H. Meckling. "The Nature of Man." Journal of Applied Corporate Finance 7, no. 2 (summer 1994): 4–19. (Reprinted in Michael C. Jensen, Foundations of Organizational Strategy, (Harvard University Press, 1998).)
  9. Self-interest, Altruism, Incentives, and Agency Theory

    Keywords: Theory;

    Citation:

    Jensen, Michael C. "Self-interest, Altruism, Incentives, and Agency Theory." Journal of Applied Corporate Finance 7, no. 2 (summer 1994): 40–45. (Reprinted in Michael C. Jensen, Foundations of Organizational Strategy, (Harvard University Press, 1998).)
  10. CEO Incentives: It's Not How Much You Pay, But How

    Citation:

    Jensen, Michael C., and Kevin J. Murphy. "CEO Incentives: It's Not How Much You Pay, But How." Harvard Business Review 68, no. 3 (May–June 1990): 138–153.
  11. Performance Pay and Top Management Incentives

    Keywords: Management; Motivation and Incentives; Performance; Jobs and Positions;

    Citation:

    Jensen, Michael C., and Kevin J. Murphy. "Performance Pay and Top Management Incentives." Journal of Political Economy 98, no. 2 (April 1990): 225–265. (Reprinted in Michael C. Jensen, Foundations of Organizational Strategy, Harvard University Press, 1998.)
  12. Is Leverage an Invitation to Bankruptcy?

    Keywords: Insolvency and Bankruptcy;

    Citation:

    Jensen, M. C. "Is Leverage an Invitation to Bankruptcy?" Wall Street Journal (February 1, 1989), A14.
  13. Compensation and Incentives: Practice vs. Theory

    Keywords: Compensation and Benefits; Motivation and Incentives; Practice; Theory;

    Citation:

    Baker, George P., Michael C. Jensen, and Kevin J. Murphy. "Compensation and Incentives: Practice vs. Theory." Journal of Finance 63, no. 3 (July 1988): 593–616. (Reprinted in Michael C. Jensen, Foundations of Organizational Strategy, Harvard University Press, 1998.)
  14. The Market for Corporate Control: The Scientific Evidence

    Keywords: Business Ventures;

    Citation:

    Jensen, M. C., and R. S. Ruback. "The Market for Corporate Control: The Scientific Evidence." Journal of Financial Economics 11, nos. 1-4 (April 1983): 5–50. (Reprinted in The Modern Theory of Corporate Finance, edited by M.C. Jensen and C. W. Smith. New York: McGraw-Hill Book Company, 1984.)

Book Chapters

  1. Creating Leaders: An Ontological/Phenomenological Model

    The sole objective of our ontological/phenomenological approach to creating leaders is to leave students actually being leaders and exercising leadership effectively as their natural self-expression. By "natural self-expression" we mean a way of being and acting in any leadership situation that is a spontaneous and intuitive effective response to what one is dealing with. In creating leaders we employ the ontological discipline (from the Latin ontologia "science of being," see Heidegger, 1927). The ontological model of leader and leadership opens up and reveals the actual nature of being when one is being a leader and opens up and reveals the source of one's actions when exercising leadership. And ontology's associated phenomenological methodology (explained in [2] below) provides actionable access to what has been opened up. The being of being a leader and the actions of the effective exercise of leadership can be accessed, researched, and taught either 1) as being and action are observed and commented on "from the stands," specifically as these are observed by someone, and then described, interpreted, and explained (third-person theory of) or 2) as being and action are actually experienced "on the court," specifically as these are actually lived (real-time first-person experience of). As a formal discipline, the "on the court" method of accessing being and action (that is, as being and action are actually lived) is named phenomenology. In short, an epistemological mastery of a subject leaves one knowing. An ontological mastery of a subject leaves one being.

    Keywords: Leadership Development; Attitudes; Behavior; Experience and Expertise; Knowledge Acquisition;

    Citation:

    Jensen, Michael C., Werner Erhard, and Kari L. Granger. "Creating Leaders: An Ontological/Phenomenological Model." Chap. 16 in The Handbook for Teaching Leadership: Knowing, Doing, and Being, edited by Scott Snook, Nitin Nohria, and Rakesh Khurana. Thousand Oaks, CA: Sage Publications, 2012.
  2. What's a Director to Do?

    Keywords: Managerial Roles; Decision Making;

    Citation:

    Jensen, Michael C., and Joseph Fuller. "What's a Director to Do?" In Best Practice: Ideas and Insights from the World's Foremost Business Thinkers, edited by Tom Brown and Robert Heller. Cambridge, MA: Perseus Publishing, 2003.
  3. Value Maximization and the Corporate Objective Function

    Keywords: Value Creation;

    Citation:

    Jensen, Michael. "Value Maximization and the Corporate Objective Function." In Breaking the Code of Change, edited by Michael Beer and Nitin Nohria. Boston: Harvard Business School Press, 2000. (Forthcoming in Management Revolution: The Legacy of the Market for Corporate Control, Harvard University Press. Reprinted in Business Ethics Quarterly, v 12, No 1, 2001, & European Financial Management, v.7, no.3, September 2001.)
  4. Organizations and Markets at Harvard Business School, 1984-1996

    Keywords: Higher Education; Markets; Organizations;

    Citation:

    Baker, George P., Michael C. Jensen, Carliss Y. Baldwin, and Karen H. Wruck. "Organizations and Markets at Harvard Business School, 1984-1996." In The Intellectual Venture Capitalist: John H. McArthur and the Work of the Harvard Business School, 1980-1995, edited by T. K. McCraw and J. L. Cruikshank. Boston: Harvard Business School Press, 1999.
  5. Divisional Performance Measurement

    Keywords: Performance Efficiency; Performance Productivity;

    Citation:

    Jensen, Michael. "Divisional Performance Measurement." In Foundations of Organizational Strategy, by Michael C. Jensen, 345–361. Cambridge: Harvard University Press, 1998.
  6. U.S. Corporate Governance: Lessons from the 1980s

    Keywords: Corporate Governance; United States;

    Citation:

    Jensen, Michael C., and Donald Chew. "U.S. Corporate Governance: Lessons from the 1980s." In The Portable MBA in Investment, edited by P. Bernstein. New York: John Wiley & Sons, 1995. (Abridged version published in Theory of the Firm: Governance, Residual Claims, and Organizational Forms, (Harvard University Press, 2000).)
  7. Takeovers: Their Causes and Consequences

    Keywords: Acquisition;

    Citation:

    Jensen, Michael C. "Takeovers: Their Causes and Consequences." In Readings in Mergers and Acquisitions, edited by P. A. Gaughan. Cambridge, MA: Basil Blackwell, 1994. (Also published in Journal of Economic Perspectives, Vol. 2, No. 1 (winter 1988); an abridged version forthcoming in Management Revolution: The Legacy of the Market for Corporate Control, (Harvard University Press))
  8. The Agency Costs of Free Cash Flow: Corporate Finance and Takeovers

    Keywords: Cost; Cash Flow; Acquisition; Corporate Finance;

    Citation:

    Jensen, Michael. "The Agency Costs of Free Cash Flow: Corporate Finance and Takeovers." In Management Buy-Outs, edited by Mike Wright and Keith Bradley, series editor, pp. 3–9. International Library of Management. England and Vermont: Dartmouth Publishing, 1994. (Also in AER, Vol. 76, No. 2 (May, 1986); abridged in Simon Management Rev, (Win, 1986); & forthcoming in Jensen, Management Revolution: The Legacy of the Market for Corporate Control, Harvard University Press.)
  9. Separation of Ownership and Control

    Keywords: Ownership; Power and Influence; Governance;

    Citation:

    Jensen, Michael C., and Eugene F. Fama. "Separation of Ownership and Control." In Management of Non-profit Organizations, edited by S. M. Oster. Dartmouth Publishing, 1994. (Also published in Journal of Law and Economics, Vol. 26, No. 2 (June, 1983) and Michael C. Jensen, Foundations of Organizational Strategy, (Harvard University Press, 1998).)
  10. The Adjustment of Stock Prices to New Information

    Keywords: Stocks; Financial Markets; Information; Fluctuation; Financial Services Industry;

    Citation:

    Fama, Eugene F., Lawrence Fisher, Michael C. Jensen, and Richard J. Roll. "The Adjustment of Stock Prices to New Information." In Strategic Issues in Finance, edited by Keith Wand. Butterworth-Heinemann, 1993. (Previously published in International Economic Review, Vol. 10 (Feb. 1969) and Investment Management: Some Readings, J. Lorie and R. Brealey, Eds (Praeger Publishers, 1972))
  11. Specific and General Knowledge and Organizational Structure

    Keywords: Organizational Structure; Knowledge;

    Citation:

    Jensen, Michael C., and William H. Meckling. "Specific and General Knowledge and Organizational Structure." In Contract Economics, edited by L. Werin and H. Wijkander. Oxford, U.K.: Blackwell Publishers, 1992. (Reprinted in Journal of Applied Corporate Finance, (Fall 1995) and Michael C. Jensen, Foundations of Organizational Strategy, (Harvard University Press, 1998).)
  12. Arbitrage, Information Theft, and Insider Trading

    Keywords: Financial Markets; Information; Ethics;

    Citation:

    Jensen, Michael. "Arbitrage, Information Theft, and Insider Trading." In New Palgrave Dictionary of Money and Finance, edited by Peter Newman, Murray Milgate, and John Eatwell. London: Macmillan Press, 1992. (Earlier version, Arbitrage, Information Theft, and the Mistaken Attack On Insider Trading, published in "Chief Financial Officer U.S.A.", John Thackray, ed. (Sterling Publications, London: 1988), pp. 114-115.)
  13. Eclipse of the Public Corporation

    Keywords: Public Ownership;

    Citation:

    Jensen, Michael C. "Eclipse of the Public Corporation." In The Law of Mergers, Acquisitions, and Reorganizations, edited by D. A. Oesterle. St. Paul, MN: West Publishing Company, 1991. (Forthcoming in Management Revolution: The Legacy of the Market for Corporate Control, (Harvard University Press))
  14. Effects of LBOs on Tax Revenues of the U.S. Treasury

    Keywords: Leveraged Buyouts; Taxation; Sovereign Finance; United States;

    Citation:

    Jensen, Michael C., Laura Stiglin, and Steven N. Kaplan. "Effects of LBOs on Tax Revenues of the U.S. Treasury." In The Law of Mergers, Acquisitions, and Reorganizations, edited by D. A. Oesterle. St. Paul, MN: West Publishing Company, 1991. (Forthcoming in Management Revolution: The Legacy of the Market for Corporate Control, Harvard University Press.)
  15. LBOs and the Reemergence of Institutional Monitoring of Managers

    Keywords: Leveraged Buyouts; Corporate Accountability; Corporate Governance; Management;

    Citation:

    Jensen, Michael C. "LBOs and the Reemergence of Institutional Monitoring of Managers." In Leveraged Management Buyouts: Causes and Consequences, edited by Yakov Amihud, pp. 263–268. Homewood, IL: Dow Jones-Irwin, 1989.
  16. Characteristics of Hostile and Friendly Takeover Targets

    Keywords: Acquisition;

    Citation:

    Jensen, Michael. Comment on "Characteristics of Hostile and Friendly Takeover Targets." Proceedings of Conference on Corporate Takeovers: Causes and Consequences, edited by Alan Auerbach. University of Chicago Press, 1988.
  17. The Takeover Controversy: Analysis and Evidence

    Keywords: Acquisition;

    Citation:

    Jensen, Michael. "The Takeover Controversy: Analysis and Evidence." In Knights, Raiders and Targets: The Impact of the Hostile Takeover, edited by John Coffee and Susan Rose-Ackerman. Oxford University Press, 1988. (Also in Midland Corporate Finance Journal, summer 1986; Stern, Stewart, & Chew, eds., Corporate Restructuring & Executive Compensation, Ballinger Pub, 1989; forthcoming in Jensen, Management Revolution, Harvard University Press.)
  18. Takeovers: The Controversy and the Evidence

    Keywords: Acquisition;

    Citation:

    Jensen, Michael. "Takeovers: The Controversy and the Evidence." In Proceedings of the William G. Karnes Symposium on Mergers and Acquisitions, edited by Charles M. Linke. University of Illinois: University of Illinois at Urbana-Champaign, Bureau of Economic and Business Research, 1986.
  19. Stockholder, Manager, and Creditor Interests: Applications of Agency Theory

    Keywords: Agency Theory; Business and Shareholder Relations; Financing and Loans; Credit; Borrowing and Debt;

    Citation:

    Jensen, Michael, and Clifford W. Smith Jr. "Stockholder, Manager, and Creditor Interests: Applications of Agency Theory." In Recent Advances in Corporate Finance, edited by E. I. Altman and M. G. Subrahmanyam. Homewood, IL: Richard D. Irwin, 1985. (Reprinted in Theory of the Firm: Governance, Residual Claims, and Organizational Forms, (Harvard University Press, 2000).)
  20. Capital Structure Change and Decreases in Stockholders' Wealth

    Keywords: Capital Structure; Wealth; Loss;

    Citation:

    Jensen, Michael. Comment on "Capital Structure Change and Decreases in Stockholders' Wealth." National Bureau of Economic Research Proceedings of Conference on Corporate Capital Structures in the United States. University of Chicago Press, 1984.
  21. The Theory of Corporate Finance: A Historical Overview

    Keywords: History; Theory; Corporate Finance;

    Citation:

    Jensen, Michael, and Clifford W. Smith Jr. "The Theory of Corporate Finance: A Historical Overview." In The Modern Theory of Corporate Finance, edited by Michael C. Jensen and Clifford H. Smith Jr., pp. 2–20. McGraw-Hill, 1984.
  22. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure

    Keywords: Managerial Roles; Management Style; Ownership; Organizational Structure; Theory;

    Citation:

    Jensen, Michael, and William H. Meckling. "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure." In The Modern Theory of Corporate Finance, edited by Michael C. Jensen and Clifford H. Smith Jr.. McGraw-Hill, 1984. (Also in Economics of Corporation Law & Securities Regulation, Posner & Scott, Eds, (Little Brown,1980); Jensen, Foundations of Organizational Strategy, (HUP, 1998); & Theory of the Firm. . . (HUP, 2000) and JFE.)
  23. Corporate Governance and 'Economic Democracy': An Attack on Freedom

    Keywords: Corporate Governance;

    Citation:

    Jensen, Michael, and William H. Meckling. "Corporate Governance and 'Economic Democracy': An Attack on Freedom." In Corporate Governance: A Definite Exploration of the Issues, edited by C. J. Huizenga., 1983.
  24. Reflections on the Corporation as a Social Invention

    Keywords: Business Ventures;

    Citation:

    Jensen, Michael C., and William H. Meckling. "Reflections on the Corporation as a Social Invention." In Controlling the Giant Corporation: A Symposium, edited by Robert Hessen. Rochester, NY: University of Rochester, Graduate School of Management, Center for Research in Government Policy and Business, 1982. (Reprinted in the Midland Corporate Finance Journal, Vol. 1, No. 3 (autumn 1983); reprinted in International Institute for Economic Research Reprint Paper 18 (November 1983).)
  25. Tests of Capital Market Theory and Implications of the Evidence

    Keywords: Capital Markets; Mathematical Methods;

    Citation:

    Jensen, Michael. "Tests of Capital Market Theory and Implications of the Evidence." In Handbook of Financial Economics, edited by J. L. Bicksler. North-Holland Publishing Company, 1980. (Originally published in Is Financial Analysis Useless? Proceedings of a Seminar on the Efficient Market and Random Walk Hypotheses (The Financial Analysts Research Foundation, 1975).)
  26. Toward a Theory of the Press

    Keywords: Media; Media and Broadcasting Industry; Journalism and News Industry;

    Citation:

    Jensen, Michael C. "Toward a Theory of the Press." In Economics and Social Institutions, edited by Karl Brunner. Martinus Nijhoff Publishers, 1979.
  27. Conflict Between the Political and Private Sectors

    Keywords: Public Sector; Private Sector; Conflict and Resolution;

    Citation:

    Jensen, Michael, and William H. Meckling. "Conflict Between the Political and Private Sectors." In Study of World Economic Change. Booz & Company, 1978.
  28. The Debasement of Contracts and the Decline of Capital Markets

    Keywords: Contracts; Capital Markets; Value; Financial Services Industry;

    Citation:

    Jensen, Michael C. "The Debasement of Contracts and the Decline of Capital Markets." In The World Capital Shortage, edited by Alan Heslop. Indianapolis, IN: Bobbs-Merrill Company, 1977.
  29. Reflections on the State of Accounting Research and the Regulation of Accounting

    Keywords: Accounting; Research; Governing Rules, Regulations, and Reforms; Accounting Industry;

    Citation:

    Jensen, Michael. "Reflections on the State of Accounting Research and the Regulation of Accounting." In Conflicts and Compromises in Financial Reporting, edited by John C. Burton.Stanford Lectures in Accounting. Palo Alto, CA: Stanford Graduate School of Business, 1976.
  30. Risk and the Discount Rate for Public Investment

    Keywords: Risk and Uncertainty; Investment; Public Sector;

    Citation:

    Jensen, Michael C., and Martin J. Bailey. "Risk and the Discount Rate for Public Investment." In Studies in the Theory of Capital Markets, edited by M. C. Jensen. New York: Praeger, 1972.
  31. The Capital Asset Pricing Model: Some Empirical Tests

    Keywords: Capital; Asset Pricing; Mathematical Methods;

    Citation:

    Black, Fischer, Michael C. Jensen, and Myron Scholes. "The Capital Asset Pricing Model: Some Empirical Tests." In Studies in the Theory of Capital Markets, edited by M. C. Jensen. New York: Praeger, 1972.
  32. The Foundation and Current State of Capital Market Theory

    Keywords: Capital Markets; Theory;

    Citation:

    Jensen, Michael C. "The Foundation and Current State of Capital Market Theory." In Studies in the Theory of Capital Markets, edited by M. C. Jensen. New York: Praeger, 1972.
  33. Random Walks and Technical Theories: Some Additional Evidence

    Keywords: Mathematical Methods;

    Citation:

    Benington, George A., and Michael C. Jensen. "Random Walks and Technical Theories: Some Additional Evidence." In Security Evaluation and Portfolio Analysis, edited by E. Elton and M. Gruber. Prentice Hall, 1972. (Also published in Journal of Finance (May 1970) and Investment Management: Some Readings, J. Lorie and R. Brealey, Editors (Praeger Publishers, 1972).)
  34. Optimal Utilization of Market Forecasts and the Evaluation of Portfolio Performance

    Keywords: Investment Portfolio; Financial Markets; Forecasting and Prediction; Performance Evaluation;

    Citation:

    Jensen, Michael. "Optimal Utilization of Market Forecasts and the Evaluation of Portfolio Performance." In Mathematical Methods in Finance, edited by G. P. Szego and Karl Shell. North-Holland Publishing Company, 1972.
  35. The Performance of Mutual Funds in the Period 1945-1964

    Keywords: Investment Funds; Performance; Financial Services Industry;

    Citation:

    Jensen, Michael. "The Performance of Mutual Funds in the Period 1945-1964." In Investment Management: Some Readings, edited by J. Lorie and R. Brealey. Praeger, 1972. (Previously published in Journal of Finance (May, 1968))
  36. Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolios

    Keywords: Investment Portfolio; Risk and Uncertainty; Capital; Asset Pricing; Performance Evaluation;

    Citation:

    Jensen, Michael. "Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolios." In Frontiers of Investment Analysis, edited by E. Bruce Fredrikson. International Textbook Company, 1971. (Previously published in Journal of Business, Vol. 42 (April, 1969))
  37. The Time Series Behavior of Earnings: Discussion

    Keywords: Business Earnings; Mathematical Methods;

    Citation:

    Jensen, Michael. "The Time Series Behavior of Earnings: Discussion." In Empirical Research in Accounting: Selected Studies. University of Chicago, Institute of Professional Accounting, 1970.
  38. Determinants of Mutual Fund Performance

    Keywords: Investment Funds; Performance Productivity; Financial Services Industry;

    Citation:

    Jensen, Michael. "Determinants of Mutual Fund Performance." In Proceedings of the Seminar on the Analysis of Security Prices. University of Chicago Press, 1967.

Working Papers

  1. Putting Integrity into Finance: A Purely Positive Approach

    We summarize our new positive theory of integrity that has no normative content, and argue that there are large gains from putting integrity into finance—into both the theory and practice of finance. We define integrity as being whole and complete and unbroken. We argue that if finance scholars, teachers and practitioners take this approach to applications in finance there are huge gains to be achieved. We caution the reader that since our intention in this piece is to call attention to aspects of life and aspects of finance that are not commonly discussed, or certainly not discussed in the way we will do so here, you are likely to find it strange and even wrong or irrelevant. It is unlikely to fit your view of what a finance paper should be. And that will be encouraged by the fact that it is impossible to be complete on such a huge topic in one paper. As a young scholar, Michael lived through the days of the revolution in finance in the 1960s and 1970s when the modern approaches to finance were coming into vogue. Consistent with Kuhn's (1996) Structure of Scientific Revolutions, the established profession, and the established journals, systematically rejected such new thinking. But change did occur and we are committed to see such change continue to happen in the finance of today.

    Keywords: Finance; Ethics; Theory; Practice; Change;

    Citation:

    Erhard, Werner, and Michael C. Jensen. "Putting Integrity into Finance: A Purely Positive Approach." Harvard Business School Working Paper, No. 12-074, April 2012. (NBER Working Paper Series, No. 19986, April 2014.)
  2. Author-Level Eigenfactor Metrics: Evaluating the Influence of Authors, Institutions and Countries within the SSRN community

    In this paper, we show how the Eigenfactor® score, originally designed for ranking scholarly journals, can be adapted to rank the scholarly output of authors, institutions, and countries based on author-level citation data. Using the methods described herein, we provide Eigenfactor rankings for 84,808 disambiguated authors of 240,804 papers in the Social Science Research Network (SSRN) a pre and post-print archive devoted to the rapid dissemination of scholarly research in the social sciences and humanities. As an additive metric, the Eigenfactor scores are readily computed for collectives such as departments or institutions as well. We show that a collective's Eigenfactor score can be computed either by summing the Eigenfactor scores of its members, or by working directly with a collective-level cross-citation matrix. To illustrate, we provide Eigenfactor rankings for institutions and countries in the SSRN repository. With a network-wide comparison of Eigenfactor scores and download tallies, we demonstrate that Eigenfactor scores provide information that is both different from and complementary to that provided by download counts. We see author-level ranking as one filter for navigating the scholarly literature, and note that such rankings generate incentives for more open scholarship, as authors are rewarded for making their work available to the community as early as possible and prior to formal publication.

    Keywords: Body of Literature; Measurement and Metrics; Networks; Rank and Position; Research; Motivation and Incentives;

    Citation:

    West, Jevin D., Michael C. Jensen, Ralph J. Dandrea, Gregg Gordon, and Carl T. Bergstrom. "Author-Level Eigenfactor Metrics: Evaluating the Influence of Authors, Institutions and Countries within the SSRN community." Harvard Business School Working Paper, No. 12-068, February 2012.
  3. CEO Bonus Plans: And How to Fix Them

    Almost all CEO and executive bonus plans have serious design flaws that limit their benefits dramatically. Such poorly designed executive bonus plans destroy value by providing incentives to manipulate the timing of earnings, mislead the board about organizational capabilities, take on excessive (or insufficient) risk, forgo profitable projects, and ignore the cost of capital. We describe the causes of the problems associated with widely prevalent executive bonus plans, and offer our recommendations for fixing them. We focus on choosing the right performance measure, determining how performance thresholds, targets, or benchmarks are set, and defining the pay-performance relation and how the relation changes over time.

    Keywords: Business Earnings; Competency and Skills; Cost of Capital; Executive Compensation; Risk Management; Performance Evaluation; Projects; Motivation and Incentives; Value;

    Citation:

    Murphy, Kevin J., and Michael C. Jensen. "CEO Bonus Plans: And How to Fix Them." Harvard Business School Working Paper, No. 12-022, October 2011.
  4. The Three Foundations of a Great Life, Great Leadership, and a Great Organization

    I argue here that the three factors my co-authors and I identify as constituting the foundation for being a leader and the effective exercise of leadership can also be seen as the foundations not only for great leadership, but also for a high quality personal life and an extraordinary organization. One can see this as a "value free" approach to values because 1) integrity as we define it (being whole and complete) is a purely positive proposition, 2) authenticity is also a purely positive proposition (being and acting consistent with who you hold yourself out to be for others and who you hold yourself to be for yourself), and 3) being committed to something bigger than oneself is also a purely positive proposition (that says nothing about what that commitment should be other than it be bigger than oneself).

    Keywords: Leadership; Organizations; Performance Effectiveness; Work-Life Balance; Strategy; Value;

    Citation:

    Jensen, Michael C. "The Three Foundations of a Great Life, Great Leadership, and a Great Organization." Harvard Business School Working Paper, No. 11-122, May 2011.
  5. A 'Value-Free' Approach to Values (PDF File of PowerPoint Slides)

    We argue here that the three factors we identify as constituting the foundation for being a leader and the effective exercise of leadership can also be seen as "A 'Value-Free' Approach to Values" that proves to be very effective in allowing students to acquire the foundations not only for great leadership, but also for a high quality personal life and an extraordinary organization. We characterize this approach as "value free" because, 1) integrity as we define it (being whole and complete) is a purely positive proposition, 2) authenticity is also a purely positive proposition (being and acting consistent with who you hold yourself out to be for others and who you hold yourself out to be for yourself), and 3) being committed to something bigger than oneself is also a purely positive proposition (that says nothing about what that commitment should be other than that it be bigger than oneself). This presentation is based on our leadership research program conducted over the last seven years. That research was designed to discover what it actually takes to create leaders—that is, to leave students at the end of the course being leaders and effectively exercising leadership as their natural self expression. The current version of the course materials can be viewed at: http://ssrn.com/abstract=1263835

    Keywords: Curriculum and Courses; Presentations; Leadership Development; Attitudes; Value;

    Citation:

    Jensen, Michael C., and Werner Erhard. "A 'Value-Free' Approach to Values (PDF File of PowerPoint Slides)." Harvard Business School Working Paper, No. 11-010, October 2010.
  6. Course Materials For: 'Being a Leader and the Effective Exercise of Leadership - An Ontological Model'

    This course is designed to leave students being leaders and exercising leadership effectively as their natural self-expression - rather than attempting to learn the characteristics, styles, and skills of noteworthy leaders, and then trying to remember and apply them where appropriate. The course is not designed to merely leave the students with knowledge (that is not designed to leave students knowing about leaders and leadership and able to cogently discuss the issues surrounding leader and leadership). Rather, the course is designed to give students actual access to being a leader and the effective exercise of leadership. Our promise to the students is that if they honor their word to fulfill the requests we make of them they will leave the course being leaders and exercising leadership effectively. The course material is based on our work over the last seven years in developing a course of the same title at the University of Rochester Simon School of Business (which course is now also taught at the US Air Force Academy, was delivered in June 2010 at Texas A&M University Mays School of Business, and at Erasmus Academie Rotterdam in June 2009, a version of which is taught at the Erasmus University Law School). The course is still under development and will be for several more years. The research project that led to the creation of this course (and the papers and slides on leadership that are part of the course) originated from our interest in laying the foundations for a science of leadership. We agree with Warren Bennis (2002, p. 2) and Joseph Rost (1993, p. 8) who conclude respectively: "It is almost a cliche of the leadership literature that a single definition of leadership is lacking." and "The scholars do not know what it is they are studying, and the practitioners do not know what it is they are practicing." Taking on the question of what leadership is required us to get into what it is to be a leader and what it is to exercise leadership effectively as a lived experience, rather than as a description, explanation or a theory. Getting to the core of being a leader and the actions of effective leadership led naturally to tackling the task of actually creating leaders and the natural laboratory for exploring that question was the classroom. Mark Zupan, Dean of the U. of Rochester Simon School of Business and his colleagues provided us the five-year laboratory to do this and the course was created. For the full introductory paper to the course (the 6th of six pre-course readings): Introductory Reading for Being A Leader and the Effective Exercise of Leadership: An Ontological Model see: http://ssrn.com/abstract=1238158 A directory to all six of the pre-course readings can be found at: http://ssrn.com/abstract=1588288

    Keywords: Curriculum and Courses; Leadership Development; Research; Science; Attitudes;

    Citation:

    Erhard, Werner H., Michael C. Jensen, Steve Zaffron, and Kari L. Granger. "Course Materials For: 'Being a Leader and the Effective Exercise of Leadership - An Ontological Model'." Harvard Business School Working Paper, No. 09-038, October 2010.
  7. Being a Leader and the Effective Exercise of Leadership: An Ontological Model (PDF File of PowerPoint Slides)

    This presentation is based on our research program over the last seven years in which our objective has been to rigorously distinguish leader and leadership and to create a technology for providing access to being a leader and exercising leadership effectively (in short, a technology for reliably creating leaders). Our research program involves not only discovering the technology, but also to create a course that would be available to others to use, experiment with, research, improve on and innovate from. Our efforts thus required an experimental laboratory to discover what will enable us as educators and trainers to efficiently and effectively create leaders.

    Dean Mark Zupan of the U. of Rochester Simon School Of Business provided us with a research/teaching laboratory during the five years (2004–2008) we worked there with students, alumni, executives, and faculty from various academic institutions. This laboratory allowed us to investigate leader and leadership as phenomena, and to create technologies for providing actionable access to leader and leadership. The course is now also taught at the U.S. Air Force Academy, was delivered in 2009 at the Erasmus Academie (Rotterdam), and a version of which is taught at the Erasmus University Law School. In June 2010 the course was taught at the Mays School of Business, Texas A&M University.

    The course is designed to leave participants being leaders and exercising leadership effectively as their natural self expression, and to contribute to creating a new science of leadership. We have two or three more years of development left to do and eventually we will produce the product as papers and perhaps a book.

    The technology and the course is founded on what we term an ontological model of human nature. The ontological approach is uniquely effective in providing actionable access to being a leader and exercising leadership effectively.

    While ontology as a general subject is concerned with the being of anything, here we are concerned with the ontology of human beings (the nature and function of being for human beings). Specifically we are concerned with the ontology of leader and leadership (the nature and function of being for a leader and the actions of effective leadership). Who one is being when being a leader shapes one's perceptions, emotions, creative imagination, thinking, planning, and consequently one's actions in the exercise of leadership.

    Being a leader and the effective exercise of leadership as one's natural self-expression does not come from learning and trying to emulate the characteristics or styles of noteworthy leaders, or learning what effective leaders do and trying to emulate them (and most certainly not from merely being in a leadership position, or position of authority). If you are not being a leader, and you try to act like a leader, you are likely to fail. That's called being inauthentic (playing a role or pretending to be a leader), deadly in any attempt to exercise leadership.

    An epistemological mastery of a subject leaves you knowing. An ontological mastery of a subject leaves you being.

    Gaining access to being a leader and the effective exercise of leadership as one's natural self-expression also requires dealing with those factors present in all human beings that constrain each person's freedom to be—and constrain and shape one's perceptions, emotions, creative imagination, thinking, planning, and actions. When one is not constrained or shaped by these factors—what we term "ontological constraints"—one's way of being and acting results naturally in one's personal best. We work with the students so that they accomplish this for themselves.

    Keywords: Curriculum and Courses; Innovation and Invention; Leadership Development; Goals and Objectives; Research and Development; Attitudes; Perception; Technology; United States;

    Citation:

    Erhard, Werner, Michael C. Jensen, and Kari Granger. "Being a Leader and the Effective Exercise of Leadership: An Ontological Model (PDF File of PowerPoint Slides)." Harvard Business School Working Paper, No. 09-124, October 2010.
  8. Creating Leaders: An Ontological Model

    The sole objective of our ontological approach to creating leaders is to leave students actually being leaders and exercising leadership effectively as their natural self-expression. By "natural self-expression" we mean a way of being and acting in any leadership situation that is a spontaneous and intuitive effective response to what one is dealing with. In creating leaders we employ the ontological discipline (from the Latin ontologia "science of being," see Heidegger (1927)). The ontological model of leader and leadership opens up and reveals the actual nature of being when one is being a leader and opens up and reveals the source of one's actions when exercising leadership. And ontology's associated phenomenological methodology (explained in the next paragraph) provides actionable access to what has been opened up. The being of being a leader and the actions of the effective exercise of leadership can be accessed, researched, and taught either: 1) as being and action are observed and commented on "from the stands," specifically as these are observed by someone, and then described, interpreted and explained (third-person theory of), or 2) as being and action are actually experienced "on the court," specifically as these are actually lived (real-time first-person experience of). As a formal discipline, the "on the court" method of accessing being and action (that is, as being and action are actually lived) is named phenomenology. In short, an epistemological mastery of a subject leaves one knowing. An ontological mastery of a subject leaves one being. Of course the students themselves do not need to study ontology; they only require the access to being and the source of action that is provided by the ontological perspective. And, they don't need to study phenomenology; they only need to be provided with the actionable pathway to the being of being a leader and the actions of effective leadership made available by the phenomenological methodology.

    Keywords: Leadership Development; Goals and Objectives; Science; Attitudes; Perspective;

    Citation:

    Erhard, Werner, Michael C. Jensen, and Kari L. Granger. "Creating Leaders: An Ontological Model." Harvard Business School Working Paper, No. 11-037, October 2010.
  9. CREATING LEADERS WORKSHOP: Mastering the Principles and Effective Delivery of 'The Ontological Leadership Course' (PDF File of PowerPoint Slides)

    This workshop is designed to support participants in gaining mastery in the delivery of our new course: "Being A Leader and the Effective Exercise of Leadership: An Ontological Model." The Workshop was delivered at the United States Air Force Academy (July 13 - 16, 2010), and was sponsored by the Kauffman Foundation, the Gruter Foundation, the United States Air Force Academy, and the Instructors. The workshop is for scholars who are graduates of our course, "Being A Leader and the Effective Exercise of Leadership: An Ontological Model," who are now interested in teaching the course at their respective institutions. Workshop objectives: 1. Provide participants access to the principles underlying the Ontological Leadership Course. 2. Empower and enable participants to expand their capacity to effectively deliver the Ontological Leadership Course. 3. Provide participants the opportunity to ongoingly collaborate in their delivery of the Ontological Leadership Course. 4. Provide participants an opportunity to create a community of scholars, educators, and practitioners to advance the Ontological Leadership Project. 5. Inquire into the next research frontier for the science of leadership. The workshop aims to equip and engage scholars and educators to deliver a high-impact transformative leadership course creating leaders ready to meet the global demands of the 21st century. Workshop participants included 41 scholars and administrators from North America and Europe from various academic institutions, including the U.S. Air Force Academy (USAFA), business schools, medical schools, law schools, military institutions, and research centers. This workshop is intended to serve as a catalyst for global leadership development at the highest levels of international policy, business, academy, governance, development and security. The Ontological Leadership Course Material is available at: http://ssrn.com/abstract=1263835

    Keywords: Curriculum and Courses; Values and Beliefs; Globalization; Policy; Leadership Development; Goals and Objectives; Performance Capacity; Social and Collaborative Networks;

    Citation:

    Erhard, Werner, Michael C. Jensen, Kari L. Granger, and Joseph J. DiMaggio M.D. "CREATING LEADERS WORKSHOP: Mastering the Principles and Effective Delivery of 'The Ontological Leadership Course' (PDF File of PowerPoint Slides) ." Harvard Business School Working Paper, No. 11-002, October 2010.
  10. A New Paradigm of Individual, Group and Organizational Performance

    "The committee is therefore unable to draw conclusions, based on scientific evidence, on what does or does not work to enhance organizational performance" —Committee on Techniques for the Enhancement of Human Performance of the U.S. National Research Council Commission on Behavioral and Social Sciences and Education (Druckman et al. 1997) The current model of performance, while having produced many improvements in performance during its 100 year reign, has been essentially exhausted leaving in its wake little more than a labyrinth of explanations for human performance. Given that models are constrained and shaped by the paradigm from within which they are generated, a truly new model of performance would require a new paradigm of performance. Our new model of performance (a part of our new paradigm of performance), rather than adding more explanations for why people do what they do and why they don't do what they don't do, provides actionable access to the source of performance. This actionable access to the source of performance opens up a new realm of opportunity for study and research, and for new and more effective interventions, applications, and practices for improving individual, group, and organizational performance.

    Keywords: Organizations; Performance Improvement; Research; Opportunities;

    Citation:

    Erhard, Werner, Michael C. Jensen, and The Barbados Group. "A New Paradigm of Individual, Group and Organizational Performance." Harvard Business School Working Paper, No. 11-006, July 2010.
  11. Just Say No to Wall Street: Putting A Stop to the Earnings Game

    Putting an end to the "earnings game" requires that CEOs reclaim the initiative by avoiding earnings guidance and managing expectations in such a way that their stocks trade reasonably close to their intrinsic value. In place of earnings forecasts, management should provide information about the company's strategic goals and main value drivers. They should also discuss the risks associated with the strategies, and management's plans to deal with them.

    Using the experiences of several companies, the authors illustrate the dangers of conforming to market pressures for unrealistic growth targets. They argue that an overvalued stock, by encouraging overpriced acquisitions and other risky, value-destroying bets, can be as damaging to the long-run health of a company as an undervalued stock.

    CEOs and CFOs put themselves in a bind by providing earnings guidance and then making decisions designed to meet Wall Street's expectations for quarterly earnings. When earnings appear to be coming in short of projections, top managers often react by suggesting or demanding that middle and lower level managers redo their forecasts, plans, and budgets. In some cases, top executives simply acquiesce to increasingly unrealistic analyst forecasts and adopt them as the basis for setting organizational goals and developing internal budgets. But in cases where external expectations are impossible to meet, either approach sets up the firm and its managers for failure and in the process value is destroyed.

    Keywords: Stocks; Performance Expectations; Goals and Objectives; Risk and Uncertainty; Growth and Development Strategy; Decisions; Risk Management; Budgets and Budgeting; Earnings Management; Value; Projects;

    Citation:

    Fuller, Joseph, and Michael C. Jensen. "Just Say No to Wall Street: Putting A Stop to the Earnings Game." Harvard Business School Working Paper, No. 10-090, April 2010.
  12. Introductory Reading for Being a Leader and the Effective Exercise of Leadership: An Ontological Model

    This paper is the sixth of six pre-course reading assignments for an experimental leadership course developed by the authors over five years (2004-2008) at the U. of Rochester Simon School of Business working with students, alumni, executives, and faculty from various academic institutions. It is currently taught at the U.S. Air Force Academy, was taught in June 2009 at the Erasmus Academie in Rotterdam, and a version is currently taught at U. of Rochester Simon School of Business, and the Erasmus University Law School. This course will be taught at the Mays School of Business, Texas A&M University June 9 to June 16, 2010. The intention of this course is to leave the participants actually being leaders and exercising leadership effectively as their natural self-expression, and for the course to contribute to creating a new science of leadership for ourselves and others to use, experiment with, research, improve on, and innovate from. This leadership course is different from others you may know of or have experienced. This course is based on the proposition that: 1) given being and action by the right context for leader and leadership, everyone has the capacity to be a leader, and 2) there are certain personal obstacles that must be dealt with in order to actualize that capacity. In the course students master a context that gives them the being of a leader and the effective exercise of leadership as their natural self-expression. Rather than teaching "leadership strategies" or being a "how to guide," this course allows participants to create for themselves that enabling and empowering context that gives one the being and action of a leader as one's natural self-expression. And, in the course we provide participants the opportunity to become aware of and deal with their personal obstacles. This allows them to remove, or at least relax, those obstacles and access their natural capacity for leadership. The promise of this course: You will leave this course being who you need to be to be a leader. You will leave this course with what it takes to exercise leadership effectively. While you will not necessarily have all of the experience and knowledge you need to be a truly extraordinary leader, you will have experienced whatever personal transformation is required for you to leave the course being who you need to be to be a leader, and with what it takes to exercise leadership effectively.

    Keywords: Leadership Development; Curriculum and Courses; Strategy; Performance Capacity; Attitudes; Behavior; United States; Netherlands; Texas;

    Citation:

    Erhard, Werner, Michael C. Jensen, Steve Zaffron, and Kari L. Granger. "Introductory Reading for Being a Leader and the Effective Exercise of Leadership: An Ontological Model." Harvard Business School Working Paper, No. 10-091, April 2010.
  13. A New Model of Integrity: The Missing Factor Of Production (PDF file of Keynote and PowerPoint Slides)

    An Actionable Pathway To Dramatic Increases In Individual And Organizational Performance.

    Full Day Executive Program Seminar taught at Olin Business School, Washington University, St. Louis, MO.

    Workshop Objectives:

    To provide you and your organization(s) an unambiguous and actionable access to the causal link between integrity and superior performance, quality of life, value creation and competitive advantage.

    We define integrity as a state or condition of being whole, complete, unbroken, unimpaired, sound, perfect condition. We distinguish integrity as a matter of a person's (or an organization's) word being whole and complete. One's word is whole and complete when one honors one's word.

    During the course, we rigorously define your word, and we distinguish honoring one's word from keeping one's word. Honoring your word, as we define it, means you either keep your word or as soon as you know you will not, you say that you will not, and clean up any mess you cause by not keeping your word. Thus, even when you do not keep your word, you have a way to maintain your integrity.

    Honoring one's word provides a powerful and actionable pathway to earning the trust of others.

    Keywords: Performance Improvement; Programs; Trust; Competitive Advantage; Value Creation; Washington (state, US);

    Citation:

    Jensen, Michael C., Kari L. Granger, and Werner Erhard. "A New Model of Integrity: The Missing Factor Of Production (PDF file of Keynote and PowerPoint Slides)." Harvard Business School Working Paper, No. 10-087, March 2010.
  14. Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity (PDF file of Keynote Slides)

    There is far too much concern today about the conflicts of interest between people; for example, conflicts of interest between agents and owners—historically a favorite topic of Jensen—and not enough attention paid to the damage caused by an individual's conflict of interest with himself or herself. We argue here that a large amount of the damage inflicted on people and organizations is caused by actions of individuals that are not in their own self-interest. That is, people consistently impose costs on their loved ones, friends, associates, partners, employers and the public by actions that are not in their own self interest.

    In this talk we focus on the integrity issues that cause huge problems in the lives of most individuals and to every one we come in contact with. These slides draw on the work on a new model of integrity that we have co-authored with Steve Zaffron and is available at:

    http://ssrn.com/abstract=920625
    http://ssrn.com/abstract=1542759
    http://ssrn.com/abstract=1511274

    We present a positive model of integrity that, as we distinguish and define integrity, provides powerful access to increased performance for individuals, groups, organizations, and societies. Our model reveals the causal link between integrity and increased performance, quality of life, and value-creation for all entities, and provides access to that causal link. Integrity is thus a factor of production as important as knowledge and technology, yet its major role in productivity and performance has been largely hidden or unnoticed, or even ignored by economists and others.

    In summary, we show that defining integrity as honoring one's word (as we have defined honoring one's word): 1) provides an unambiguous and actionable access to the opportunity for superior performance and competitive advantage at both the individual and organizational level, and 2) empowers the three virtue phenomena of morality, ethics and legality.

    Keywords: Moral Sensibility; Lawfulness; Production; Organizations; Performance Improvement; Agency Theory; Conflict of Interests; Trust; Competitive Advantage; Value Creation;

    Citation:

    Jensen, Michael C., and Werner Erhard. "Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity (PDF file of Keynote Slides)." Harvard Business School Working Paper, No. 10-068, February 2010.
  15. Integrity: A Positive Model That Incorporates the Normative Phenomena of Morality, Ethics, and Legality Abridged

    We present a positive model of integrity that, as we distinguish and define integrity, provides powerful access to increased performance for individuals, groups, organizations, and societies. Our model reveals the causal link between integrity and increased performance, in whatever way one chooses to define performance (for example, quality of life, or value-creation for all entities), and provides access to that causal link. Integrity is thus a factor of production as important as knowledge and technology. Yet the major role of integrity in productivity and performance has been largely hidden or unnoticed, or even ignored by economists and others. The philosophical discourse, and common usage as reflected in dictionary definitions, leave an overlap and confusion among the four phenomena of integrity, morality, ethics, and legality. This overlap and confusion confound the four phenomena so that the efficacy and potential power of each is seriously diminished. We show that defining integrity as honoring one's word, as we have defined "honoring one's word:" 1) provides an unambiguous and actionable access to the opportunity for superior performance and competitive advantage at the individual, organizational and social levels, and 2) empowers the three virtue phenomena of morality, ethics and legality. We also demonstrate that applying cost-benefit analysis to honoring your word guarantees that you will be untrustworthy. This paper, intended for use in our leadership course (see http://ssrn.com/abstract=1263835), is an abridged version of our full paper of the same title available at: http://ssrn.com/abstract=920625. This abridged paper is written under the assumption that the reader has read the following 5-page document that lays out the basic structure of our model and analysis. It is available at: http://ssrn.com/abstract=1511274.

    Keywords: Trust; Performance Productivity; Technology; Knowledge; Moral Sensibility; Opportunities; Competitive Advantage; Legal Liability; Cost vs Benefits;

    Citation:

    Erhard, Werner H., Michael C. Jensen, and Steve Zaffron. "Integrity: A Positive Model That Incorporates the Normative Phenomena of Morality, Ethics, and Legality Abridged." Harvard Business School Working Paper, No. 10-061, February 2010.
  16. A New Model of Leadership (PDF File of Keynote Slides)

    In this paper we provide a new definition of leadership that gives organizations and individuals access to new power, performance and accomplishment. In our model leadership consists of four critical elements The creation of a vision for the future that represents a significant departure from the past, one that requires breakthroughs for its realization. The creation of a system that facilitates enrollment into and elicits voluntary commitment to the vision by the critical mass of people required to discover and implement the breakthroughs required for realization of the vision. The creation of a system that ensures both the timely identification of breakdowns (and the dissemination of information about them) that, if unresolved, would prevent the successful realization of the vision. The creation of a system for managing breakdowns that causes people to voluntarily recommit to the vision and maintain these commitments through to the implementation of the breakthroughs required for the realization of the vision.

    Keywords: Forecasting and Prediction; Knowledge Dissemination; Leadership; Goals and Objectives; System;

    Citation:

    Jensen, Michael C., and Allan L. Scherr. "A New Model of Leadership (PDF File of Keynote Slides)." Harvard Business School Working Paper, No. 07-107, February 2010.
  17. Integrity: Without It Nothing Works

    There is confusion between integrity, morality and ethics. In our much longer paper on the topic (see "Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics and Legality" (available at http://ssrn.com/abstract=920625)) my co-authors, Werner Erhard and Steve Zaffron and I, distinguish integrity, from morality and ethics in the following way. Integrity in our model is honoring your word. As such integrity is a purely positive phenomenon. It has nothing to do with good vs. bad, right vs. wrong behavior. Like the law of gravity the law of integrity just is, and if you violate the law of integrity as we define it you get hurt just as if you try to violate the law of gravity with no safety device. The personal and organizational benefits of honoring one's word are huge--both for individuals and for organizations--and generally unappreciated.

    Keywords: Trust; Moral Sensibility; Legal Liability; Behavior;

    Citation:

    Jensen, Michael C. "Integrity: Without It Nothing Works." Harvard Business School Working Paper, No. 10-042, November 2009.
  18. Specific Knowledge and Divisional Performance Measurement

    This paper discusses five common divisional performance measurement methods—cost centers, revenue centers, profit centers, investment centers, and expense centers—providing a theory that explains when each of these methods is likely to be the most efficient. The central insight of the theory is that each method offers a different way of aligning decision-making authority with valuable "specific knowledge" inside the organization. The theory suggests that cost and revenue centers work best in cases where headquarters has good information about cost and demand functions, product quality, and optimal output mix. Profit centers—defined as business units whose managers have responsibility for overall profits, but not the authority to make major capital spending decisions—tend to supplant revenue and cost centers when line managers have a significant informational advantage over headquarters and when there are few interdependencies (or "synergies") between divisions. Investment centers—profit centers in which unit managers are allowed to make major investment decisions—tend to prevail when the activity is capital-intensive and when it is difficult for headquarters to identify the value-maximizing investment strategy for the business unit. In evaluating the performance of profit centers, rate-of-return measures like ROA are likely to be effective when unit managers do not have major influence over the level of new investment. But, in the case of investment centers, Economic Value Added, or EVA, is likely to be the most effective single-period measure because it is designed to encourage only value-increasing investment decisions.

    Keywords: Business Units; Business Headquarters; Decisions; Cost; Investment; Investment Return; Profit; Revenue; Knowledge Use and Leverage; Managerial Roles; Performance Efficiency; Strategy;

    Citation:

    Jensen, Michael C., and William H. Meckling. "Specific Knowledge and Divisional Performance Measurement." Harvard Business School Working Paper, No. 10-025, September 2009.
  19. The Ontological Foundations of Leadership and Performance: Being a Leader, and the Effective Exercise of Leadership, A New Model

    This paper is the (pre-course) introduction document to an experimental course developed by the authors and taught at the U. of Rochester Simon School of Business. The intention of the course is to leave the participants actually being leaders and being able to exercise leadership effectively, and for the course to contribute to creating a new science of leadership. The course is founded on an ontological model of human nature.

    By ontological we mean the following: If you have ever wondered what it would be like to be a bird, or wondered what it is like to beyour dog, or to bea person of the opposite gender, or what it is like to be some particular friend of yours, you were in an ontological inquiry.

    Ontology as a general subject is concerned with the being of anything. However, here we are concerned specifically with the ontology of human beings, that is, the being of a human being.

    For a narrower and therefore easier example of being, we can talk about being angry, or being antisocial, or being a man or woman of character. We could examine these ways of being from the comfort of our somewhat familiar perspectives of the science of psychology or neuroscience.

    While less familiar for us and therefore perhaps at first uncomfortable, it is also possible to examine any of these ways of being from an ontological perspective. Here we would be examining the being aspect of being angry, or being antisocial, or being a man or woman of character. (Webster's Dictionary (1998) defines being as "fundamental or essential nature"). From this perspective we clearly see that when we are being angry, we are likely to act in anger. Likewise for being antisocial, or being a man or woman of character. From the ontological perspective it is clear that being constrains and shapes behavior.

    The ontological perspective is powerful when dealing with the being of being a leader, and being able to exercise leadership effectively. Like acting in anger when we are being angry, or acting with ease if we are being at ease, or acting with confidence when we are being confident, if we master the being of being a leader, we are likely to act as a leader, and effectively exercise leadership. And, this course is about being a leader, and acting effectively in exercising leadership as a natural consequence of being a leader.

    Effective leadership does not come from mere knowledge about what leaders do, or trying to emulate the characteristics or styles of noteworthy leaders, or from trying to remember and follow the steps, tips or techniques from books on leadership, and certainly not from merely being in a leadership position, or position of authority.

    An epistemological mastery of a subject leaves you knowing. An ontological mastery of a subject leaves you being. This course is about access to being a leader, and being able to exercise leadership effectively.

    If you are not being a leader, and you try to act like a leader, you are likely to fail. That's called inauthentic, or pretending to be a leader.

    If you are being a leader, you will act as a leader.

    Our Promise:

    You will have experienced whatever personal transformation is required for you to leave the course being who you need to be to be a leader, and with what it takes to exercise leadership effectively.

    In other words, you will be a leader.

    Keywords: Transformation; Business Education; Knowledge; Leadership Development; Leadership Style; Performance Effectiveness; Attitudes; Behavior; Perspective;

    Citation:

    Erhard, Werner, Michael C. Jensen, Steve Zaffron, and Kari L. Granger. "The Ontological Foundations of Leadership and Performance: Being a Leader, and the Effective Exercise of Leadership, A New Model." Harvard Business School Working Paper, No. 09-022, August 2008.
  20. Remuneration: Where We've Been, How We Got to Here, What Are the Problems, and How to Fix Them

    Citation:

    Jensen, Michael C., Kevin J. Murphy, and Eric Wruck. "Remuneration: Where We've Been, How We Got to Here, What Are the Problems, and How to Fix Them." ECGI Working Paper Series in Finance, No. 44-2004, July 2004. (Also in the Negotiation, Organizations and Markets Research Paper Series, Harvard Business School NOM Research Paper No. 04-28.)
  21. Agency Costs of Overvalued Equity

    Citation:

    Jensen, Michael C. "Agency Costs of Overvalued Equity." ECGI Working Paper Series in Finance, No. 39-2004, May 2004. (This paper is drawn from “The Agency Cost of Overvalued Equity and the Current State of Corporate Finance” (Keynote Lecture, European Financial Management Association), London, June 2002. It is also included in the Negotiation, Organizations and Markets Research Paper Series, Harvard NOM Research Paper No. 04-26.)
  22. The Logic of the First Amendment

    We develop a framework that is applicable to all freedom of expression disputes. Our framework is based on the meaning of freedom which is based on the meaning of scarcity, and which, in turn, is based on the existence of physical incompatibilities. To maximize freedom, one must differentiate between scarce and non-scarce rights. Scarce rights can not be granted to everyone because of natural limitations caused by physical incompatibilities. If one person burns a tree for warmth, another cannot use the tree to build a house. Conflicts caused by such physical incompatibilities are resolved peacefully by giving exclusionary rights in the physical use of the tree to a single, private party. These are scarce rights because more than one person cannot use the tree when there are physical incompatibilities. Non-scarce rights, in contrast, can be granted to everyone. The contents of one's speech, for example, in no way limits what other people may say or do. To maximize freedom, each scarce right must be assigned to some individual person, and all non-scarce rights should be assigned to everyone. We use this framework to provide an integrated and consistent analysis of prominent Supreme Court rulings on free speech issues, including public access to government and private property, symbolic speech (including flag burning), libel, and obscenity.

    Keywords: Rights; Courts and Trials; Judgments; Property; Conflict and Resolution; United States;

    Citation:

    Holderness, Clifford G., Michael C. Jensen, and William H. Meckling. "The Logic of the First Amendment." Harvard Business School Working Paper, No. 00-064, March 2000.
  23. Value Maximization and the Corporate Objective Function

    Citation:

    Jensen, Michael C. "Value Maximization and the Corporate Objective Function." Harvard Business School Working Paper, No. 00-058, March 2000.

Cases and Teaching Materials

  1. Course Materials for: Being a Leader and the Effective Exercise of Leadership--An Ontological Model

    Keywords: Leadership Development; Personal Development and Career;

    Citation:

    Erhard, Werner, Michael C. Jensen, Steve Zaffron, and Kari L. Granger. "Course Materials for: Being a Leader and the Effective Exercise of Leadership--An Ontological Model." 2009. Electronic.
  2. Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress

    Wisconsin Central Ltd. is a regional railroad formed in a leveraged buyout, which is currently in default on its loan covenants. The case uses this situation to examine the financial structure of a typical LBO association and its internal control mechanisms and distinct role of the board of directors.

    Keywords: Financial Management; Governing and Advisory Boards; Leveraged Buyouts; Financial Condition; Financing and Loans; Corporate Finance; Rail Industry;

    Citation:

    Jensen, Michael C., Willy Burkhardt, and Brian Barry. "Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress." Harvard Business School Case 190-062, November 1989. (Revised March 2000.)
  3. Wisconsin Central Ltd. Railroad and Berkshire Partners, Video

    Edward Burkhardt, president and CEO of Wisconsin Central, and Carl Freebback, general partner of Berkshire Partners, engage in a question and answer session with the students.

    Keywords: Financial Management; Governing and Advisory Boards; Leveraged Buyouts; Financial Condition; Financing and Loans; Corporate Finance; Rail Industry;

    Citation:

    Jensen, Michael C., and Brian Barry. "Wisconsin Central Ltd. Railroad and Berkshire Partners, Video." Harvard Business School Video Supplement 891-509, December 1990. (Revised February 2000.)
  4. Gordon Cain

    Citation:

    Jensen, Michael C., and Brian Barry. "Gordon Cain." Harvard Business School Video Supplement 899-503, December 1998.
  5. General Bill Creech at Harvard Business School: October 6, 1995

    General Bill Creech discusses motivation and change in the Tactical Air Command of the Air Force.

    Keywords: Change; National Security; Motivation and Incentives;

    Citation:

    Jensen, Michael C. "General Bill Creech at Harvard Business School: October 6, 1995." Harvard Business School Video Supplement 899-504, December 1998.
  6. Wisconsin Central Ltd. Railroad and Berkshire Partners Series TN

    Teaching Note for (9-190-062), (9-190-070), and (9-891-509).

    Keywords: Rail Industry;

    Citation:

    Jensen, Michael C., and Brian Barry. "Wisconsin Central Ltd. Railroad and Berkshire Partners Series TN." Harvard Business School Teaching Note 899-050, September 1998. (Revised September 1998.)
  7. Gordon Cain and the Sterling Group Series TN

    Teaching Note for (9-492-021) and (9-492-022).

    Keywords: Banking Industry; Chemical Industry; Houston;

    Citation:

    Jensen, Michael C., and Brian Barry. "Gordon Cain and the Sterling Group Series TN." Harvard Business School Teaching Note 899-051, September 1998.
  8. Value Creation: Abridged

    Asks students to value a strategic plan while considering the capital investment required to complete the plan. Cummins Engine is used as an example.

    Keywords: Investment; Strategic Planning; Valuation; Value Creation;

    Citation:

    Baker, George P., III, Michael C. Jensen, Karen Wruck, and Perry Fagan. "Value Creation: Abridged." Harvard Business School Case 898-185, March 1998.
  9. Case of the Colored Post-It Notes

    An example of how policies about budgeting and resource decisions are commonly misallocated is presented.

    Keywords: Budgets and Budgeting; Policy; Resource Allocation;

    Citation:

    Baldwin, Carliss Y., Michael C. Jensen, and Karen Wruck. "Case of the Colored Post-It Notes." Harvard Business School Case 897-069, December 1996.
  10. Wisconsin Central Ltd. Railroad and Berkshire Partners (B): LBO Associations and Corporate Governance

    Describes the resolution of the default situation. Further examines the internal control mechanisms and distinct role of the board of directors of a typical LBO association.

    Keywords: Corporate Governance; Leveraged Buyouts; Rail Industry;

    Citation:

    Jensen, Michael C. "Wisconsin Central Ltd. Railroad and Berkshire Partners (B): LBO Associations and Corporate Governance." Harvard Business School Supplement 190-070, November 1989. (Revised December 1996.)
  11. Fighton, Inc. (A)

    Citation:

    Jensen, Michael C., and Karen Wruck. "Fighton, Inc. (A)." Harvard Business School Case 391-056, September 1990. (Revised November 1996.)
  12. Fighton, Inc. (B)

    Citation:

    Jensen, Michael C., and Karen Wruck. "Fighton, Inc. (B)." Harvard Business School Supplement 391-265, June 1991. (Revised November 1996.)
  13. Gordon Cain and the Sterling Group (A)

    A Houston-based LBO firm makes two petrochemical acquisitions that benefit from improved industry conditions and improved organizational performance. The LBOs generate huge increases in value, creating problems for managers, who have large, undiversified equity holdings. The firm decides to sell one company after a year, and to take the other company public after two. Allows students to examine the causes of organizational change, the difficulties of managing success in closely held LBO companies, and the relative merits of various exit strategies.

    Keywords: Organizational Change and Adaptation; Value Creation; Business Exit or Shutdown; Leveraged Buyouts; Chemical Industry; Houston;

    Citation:

    Jensen, Michael C. "Gordon Cain and the Sterling Group (A)." Harvard Business School Case 492-021, October 1991. (Revised November 1996.)
  14. Gordon Cain and the Sterling Group (B)

    Supplements the (A) case.

    Citation:

    Jensen, Michael C. "Gordon Cain and the Sterling Group (B)." Harvard Business School Supplement 492-022, October 1991. (Revised November 1996.)
  15. Newhall Land and Farming Co. (A)

    Keywords: Agriculture and Agribusiness Industry;

    Citation:

    Cash, James I., Jr., and Michael C. Jensen. "Newhall Land and Farming Co. (A)." Harvard Business School Case 192-049, November 1991.
  16. Newhall Land and Farming Co. (B)

    Keywords: Agriculture and Agribusiness Industry;

    Citation:

    Cash, James I., Jr., and Michael C. Jensen. "Newhall Land and Farming Co. (B)." Harvard Business School Case 192-050, November 1991.
  17. Fighton, Inc. (A) and (B), Teaching Note

    Citation:

    Jensen, Michael C., and Karen Wruck. "Fighton, Inc. (A) and (B), Teaching Note." Harvard Business School Teaching Note 491-111, June 1991.

Other Publications and Materials

  1. Pioneers in Finance: An Interview with Michael C. Jensen - Part 2

    This interview is Part 2 of a two-part series in which Professor Ralph Walkling, the Stratakis Chair in Corporate Governance and Executive Director of the Center for Corporate Governance at Drexel University, interviews Professor Michael C. Jensen, Jesse Isidor Straus Professor of Business Administration, Emeritus, of the Harvard Business School, on topics ranging from his early work to current research. Professor Jensen discusses the creation of Jensen's alpha, the market model, the founding of the JFE and SSRN and his current research on leadership, integrity and ontology. In addition, he reflects on on influential colleagues and provides advice to new professors.

    Keywords: Corporate Governance; Ethics; Research; Markets; Leadership;

    Citation:

    Jensen, Michael C., and Ralph A. Walkling. "Pioneers in Finance: An Interview with Michael C. Jensen - Part 2." December 2011. (Barbados Group Working Paper No. 11-05.)
  2. Pioneers in Finance: An Interview with Michael C. Jensen - Part 1

    This interview is first of a two-part series in which Professor Ralph Walkling, the Stratakis Chair in Corporate Governance and Executive Director of the Center for Corporate Governance at Drexel University, interviews Professor Michael C. Jensen, Jesse Isidor Straus Professor of Business Administration, Emeritus, of the Harvard Business School, on topics ranging from his early work to current research. The transcript covers what led to his agency theory and corporate governance work, and the resistance he experienced in getting this early work published. Additionally, Professor Jensen reflects on the evolution in the market for corporate control over the past 20 years and discusses topical issues regarding the financial crisis, boards of directors, governance, and compensation.

    Keywords: Corporate Governance; Governing and Advisory Boards; Research; Financial Crisis; Compensation and Benefits; Agency Theory;

    Citation:

    Jensen, Michael C., and Ralph A. Walkling. "Pioneers in Finance: An Interview with Michael C. Jensen - Part 1." December 2011. (Barbados Group Working Paper No. 10-12, Harvard Business School NOM Unit Working Paper No. 11-045.)
  3. What's a Director to Do?

    Keywords: Decision Making;

    Citation:

    Jensen, Michael C., and Joseph Fuller. "What's a Director to Do?" Harvard NOM Research Paper, October 2002.