What Occupy Wall Street got right

November 9, 2011, 3:53 PM UTC

By Roger Martin and Jennifer Riel, contributors

FORTUNE — The Occupy Wall Street movement has generated a slew of questions from those outside the occupying ranks: Who are these people? What do they really want? Which city will be next? How will our public officials respond? And as the protests have stretched well into their second month, when will it all end? These questions represent an understandable attempt to make sense of a complex, diffuse and divisive movement. They attempt to explain what is happening. But they aren’t the questions we really need to ask. Instead, we should be asking why it is happening. And more importantly, we should be asking what we can learn it.

This isn’t an easy leap for business leaders. After all, we’re the enemy here. On its website, Occupy Wall Street sets its raison d’être as follows:

“#OWS is fighting back against the corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations.” It goes on: “The movement is inspired by popular uprisings in Egypt and Tunisia, and aims to expose how the richest 1% of people are writing the rules of an unfair global economy that is foreclosing on our future.”

There it is. It is the 99% versus the 1%, the rest-of-us against the richest-of-us. This framing sets the two groups in complete opposition. It has the potential to lead to the wholesale demonization of our business leaders on the one hand and the utter dismissal of the arguments of the occupiers by those very leaders on the other. This is the worst possible outcome. Anger and resentment on both sides mean the two groups shout at and ridicule one another, rather than attempting to listen to the arguments on the other side.

Business leaders, the famous 1%, need to resist the urge to dismiss the whole movement based on the scattershot and at times ill-conceived nature of the arguments on the placards. Our task is instead to parse the protest, understand the nature of the legitimate complaints that underpin the movement and to attempt to create smart remedies to those complaints.

In other words, we need to acknowledge that some of these protesters have a point. Decisions made on Wall Street (and in the City) have indeed caused massive financial disruption around the world. But while the bankers at Goldman Sachs (GS) and the traders at AIG (AIG) made decisions that helped tip us into a global recession, it does not necessarily follow that Wall Street is irredeemable. The problem isn’t that Wall Street broke the rules to their own benefit, it’s that the rules themselves are unhelpful.

Our current capital markets are structured around a dangerous lie — that the sole function of the corporation is to return value to shareholders. Under this construct, every action undertaken by Wall Street traders, mortgage brokers and the rest make perfect sense and are morally unambiguous. It was their job to sell as much as they could, to grab as much value as possible, in order to return that value to shareholders. So long as shareholder-value-maximization remains our governing principle, no change in regulations will change the fundamental behavior. Executives are simply acting according to their incentives.

So we need to change the incentives. We need to recognize that by focusing our executives on shareholders, and on share price as a proxy of the value delivered to them, we are turning them away from what matters. We should want executives to focus on their customers and their employees. We should want them to make choices that maximize customer delight, recognizing that value of all kinds will follow from that orientation.

How do we get there? We reverse the pervasive trend towards stock-based incentive compensation. We recognize that rather than aligning the interests of shareholders and executives, stock-based incentive compensation drives the short-term thinking that creates volatility and produces crashes, working definitely against the interests of long-term shareholders. It creates orientations towards the expectations market (the capital markets, where value is traded) instead of the real market (the marketplace in which products and services are created and sold, where value is created). Perhaps if our business leaders were to turn their attention back to the real market — composed of customers and employees from the 99% — we could address the very real discontent that resides there.

The Occupy Wall Street movement can be a catalyst for change. But only if we ask the right questions. As of now, next steps for the movement are unclear. Perhaps winter will cause the occupiers to decamp. Or perhaps conditions and fraying nerves will lead to a very violent, very bad denouement. Or perhaps the movement will continue to grow and spread, as it has over these past weeks, to more cities and more people. In any case, the challenge for business is to dig deeper into the roots of the protest and to respond thoughtfully, rewriting our own rules before they are rewritten for us.

Roger Martin is dean of the Rotman School of Management, University of Toronto. He has been named one of the top fifty management thinkers and ten most influential business professors in the world. He is the author of “Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL.” He serves on the Thomson Reuters and Research in Motion boards of directors. Jennifer Riel is Associate Director of the Desautels Centre for Integrative Thinking at the Rotman School and editor for Fixing the Game.