≡ Menu

The Business Audit

The rise of pension funds as dominant owners represents one of the most startling shifts in economic history.

Even the largest U.S. pension fund holds much too small a fraction of any one company’s capital to control it. Not being businesses, the funds have no access to in-depth commercial or business information. They are not business-focused, nor could they be. They are asset managers. Yet they need in-depth business analysis of the companies they collectively own. And they need an institutional structure in which management accountability is embedded.

I suspect that in the end we shall develop a formal business-audit practice, analogous perhaps to the financial-audit practice of independent professional accounting firms. For while the business audit need not be conducted every year—every three years may be enough in most cases—it needs to be based upon predetermined standards and go through a systematic evaluation of business performance: starting with mission and strategy, through marketing, innovation, productivity, people development, community relations, all the way to profitability.

ACTION POINT: Do you know what pension funds are big shareholders in your organization? What system do they have for getting information about your organization?

Managing for the Future

* Source: The Daily Drucker by Peter F. Drucker

{ 0 comments… add one }

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.