Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL.

• Author: Martin, Roger L.

Bloated executive overcompensation. Corporations with directors who enjoy the prestige, pay and clubbiness of board membership yet are clueless at providing sound corporate governance. A stock market that wipes out the life savings of millions of investors, even as "parasitic" hedge-fund managers rack up billions of dollars in fees and profits.

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These are just a few of the ills of modern capitalism, American style, that Roger L. Martin discerns in his highly readable and often acerbic analysis of what's wrong the United States business system today and how it might be corrected.

Dean of the Rotman School of Management at the University of Toronto and author of three other books, Martin departs from his professorial style to issue a highly critical treatise on why the U.S. business system is not delivering the goods and services, innovation, full employment, sustainable community involvement and shareholder value that had once been the hallmark of successful enterprises.

The holy grail of maximizing shareholder value combined with stock-based executive compensation, he writes, has meant that the energy, ingenuity and attention that was once devoted to the "real market" has instead devolved into meeting market expectations of Wall Street analysts and fickle institutional investors. "One might imagine," Martin writes, "that improving performance in the real market would increase the stock price, but this just isn't the case."

Consider the case of Microsoft Corp. From 2000-10, the legendary software company tripled its income to more than $60 billion from roughly $20 billion. Yet this was ho-hum to Wall Street, which already expected Microsoft to perform phenomenally well in what Martin calls the "real market," Thus, its stock performance remained flat when the company couldn't exceed Wall Street's out-sized expectations.

Here's where Martin's comparison to the National Football League is so useful. If professional football games operated on the same model as U.S. companies, he writes, they would not be run for the fans or the players but exclusively to benefit gamblers and betting parlors. They can be a blase lot. When the New England Patriots "thrashed" the Miami Dolphins 28-7 during their breakout 2007 season, Martin notes, the lopsided victory failed to impress Las Vegas oddsmakers who had assigned a 22-point "spread" to the Pats.

While it's a curiosity in the world of sports gambling, the...