Michael C. Jensen

Emeritus Professor

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:




Updated: February 15, 2012

  1. Leadership and Leadership Development: An Ontological Approach

    by Michael C. Jensen

    This summarizes my research program over the last twelve years (with my co-investigators Werner Erhard, Steve Zaffron, and more recently Kari Granger) in which the 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, and will be taught at the Mays School of Business, Texas A&M University in June 2010.

    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.

    The Underlying Theory of the Course: Part I

    The Three Foundational Elements of Leadership

    Integrity (in our model a positive phenomenon):

    • Being whole and complete - achieved by "honoring one's word" (creates workability, develops trust).


    • Being and acting consistent with who you hold yourself out to be for others, and who you hold yourself to be for yourself. When leading, being authentic leaves you grounded, and able to be straight without using force.

     Being Committed to Something Bigger than Oneself:

    • Source of the serene passion (charisma) required to lead and to develop others as leaders, and the source of persistence (joy in the labor of) when the path gets tough.

    The Underlying Theory of the Course: Part II

    A Context That Uses You

    ·       Our research has led us to distinguish leader and leadership through four different lenses or levels of analysis:  1) as linguistic abstractions, 2) as phenomena, 3) as concepts, and 4) as defined terms.  Viewing leader and leadership in these four dimensions creates leader and leadership as a powerful context.

    • We work with the students to create for themselves what it is to be a leader, and what it is to exercise leadership effectively, as a context that uses them. By "a context that uses them", we mean a context that has the power to leave students in any leadership situation being a leader and exercising leadership effectively as their natural self-expression. (As it has been said: "the context is decisive".)
    • By "a context that has the power to leave students being a leader and exercising leadership effectively as their natural self-expression", we mean the following:
      • A context that has the power in any leadership situation to shape the way in which the circumstances the students are dealing with occur for them such that their naturally correlated way of being and acting is one of being a leader and exercising leadership effectively.
      • Note: being and action are a natural correlate of the way in which the circumstances that a person is dealing with occur (show up) for that person.
    • Students begin to create this context for leader and leadership for themselves by first freeing themselves from the constraints and shaping imposed by their network of unexamined ideas, beliefs, biases, social and cultural embeddedness, and taken-for-granted assumptions relative to what it is to be a leader and what it is to exercise leadership effectively. This then allows students the freedom to create for themselves this new context for Leader and Leadership that has the power to become their natural self-expression.
    • We give students access to creating this new context for leader and leadership by distinguishing Leader and Leadership from the perspective of four distinct aspects, which when taken together as a whole create this new context (as illustrated in the graphic below): the context that in any leadership situation shapes the way in which what is being dealt with occurs for the student such that their naturally correlated way of being and acting is one of being a leader and exercising leadership effectively.

    We distinguish Leader and Leadership, each as:

        Linguistic Abstractions (leader and leadership as realms of possibility")

        Phenomena (leader and leadership as experienced; that is, as what one observes or is impacted by, or as exercised)

        Concepts (the temporal domain in which leader and leadership function)

        Terms (leader and leadership as definitions)

    • All founded on Integrity*, Authenticity, and being Committed To Something Bigger Than Oneself.





    The Underlying Theory of the Course: Part III

    Ontological Constraints

    • Ontological Constraints: Having distinguished what it is to be a leader, and what it is to exercise leadership effectively, as a context that has the power to give students the being of a leader and the actions of effective leadership as their natural self-expression, we provide students with exercises that allow them to become aware of and remove the ontological perceptual and functional constraints imposed on their natural self-expression.
    • Ontological Perceptual Constraints: The source of our ontological perceptual constraints is our network of unexamined ideas, beliefs, biases, social and cultural embeddedness, and taken-for-granted assumptions about the world, others, and ourselves. These ontological perceptual constraints limit and shape what we perceive of what is actually there in the situations with which we are dealing. As a consequence, if we do not remove these perceptual constraints, then in any leadership situation we are left dealing with some distortion of the situation we are actually dealing with.
    • Ontological Functional Constraints: In everyday language the behavior generated by an ontological functional constraint is sometimes referred to as a "knee-jerk reaction". Psychologists sometimes refer to this behavior as "automatic stimulus/response behavior" - where, in the presence of a particular stimulus (trigger), the inevitable response is an automatic set way of being and acting. From a neuroscience perspective, many ontological functional constraints could be termed amygdala hijacks. When triggered in a leadership situation, one's ontological functional constraints fixate one's way of being and acting. Saying the same thing in another way, these ontological functional constraints limit and shape our opportunity set for being and action. As a consequence, the appropriate way of being and appropriate actions may be, and in fact often are, unavailable to us.
    • Thus, gaining access to being a leader and the effective exercise of leadership requires that we loosen the grip of these debilitating Ontological Constraints. Or to put it more simply, we must take away what is in the way of our being a leader and exercising leadership effectively.

    For the pre-course reading assignment see: http://ssrn.com/abstract=1513400  

     And for the full 478 pages of the course material used in the Erasmus Academie course, Rotterdam, NL, June 8-12, 2009 see http://ssrn.com/abstract=1263835

  2. Coordination, Control, and the Management of Organizations

    by Michael C. Jensen

    Michael C. Jensen's research is aimed at obtaining a clearer understanding of how the 'organizational rules of the game' affect a manager's ability to accomplish his or her goals and how the rules can be structured to resolve problems and increase productivity. His analysis of centralization, decentralization, transfer pricing, and choices among profit, cost, and budget centers emphasizes the importance of people as self-interested individuals with conflicting goals and the exacerbation or amelioration of these conflicts by the organizational rules of the game. Jensen's approach presumes that individuals are sufficiently resourceful to determine the formal approach and informal rules by which rewards are distributed and will behave so as to enhance the rewards they receive. The approach also emphasizes the often non-rational or harmful effects of actions that individuals take in response to powerful personal defensive mechanisms. The research, which emphasizes the importance of information and its transfer cost to the solution of organizational problems, relies heavily on principles of economics, psychology, and neuroscience.
  3. Organizational Change: The Market for Corporate Control and the Third Industrial Revolution

    by Michael C. Jensen

    Michael C. Jensen is conducting research on organizational change and the corporate control market. Specifically, he is investigating the changing role of the corporation and competing organizational forms, such as leveraged buyout organizations, that are replacing the traditional corporation in many parts of the economy. His work highlights the reemergence of active investors who simultaneously hold large equity and/or debt positions and are actively involved in setting the strategic direction of the corporation. Jensen is investigating major changes in the global business environment being precipitated by technological, political, and managerial change that rivals that which occurred during the first and second industrial revolutions in England and the United States during the nineteenth century.