The long 'off and on' courtship between Wall Street and the American residential real estate industry reached record levels of passion and engagement in 2013. It is a trend that appears to be a clear indicator of the real estate industry to come. With this trend comes a number of quandaries either ignored, overlooked or perhaps not adequately addressed by an industry held privately in the past.

Certainly among the most important of these issues will be the subject of profitability. Paramount with respect to this issue will be the question of shareholder value versus agent compensation. There appears to be no doubt that most (although apparently not all) of the new equity based players understand the disastrous impact that agent compensation has had on profitability over the past quarter century. It remains to be seen whether or not yet another iteration of industry ownership will fall victim to agent centricity or whether this time around investors will be given an opportunity to earn a market level return on their investment.

This discussion is taking place in real estate entity boardrooms across the country. One can only be impressed with the importance of the decisions to be made. Given the almost total lack of individuals willing to plunge their private fortunes into "this is how we have always done it" follies in any industry today, the idea of this new breed following the same course seems unbelievable. Yet, it has apparently happened in at least one significant case, so who knows?

Given the presence of so many executives and managers who were raised in the agent centric world, there is no doubt that an endless number of points are being made in support of "staying the course" and honoring the system that got us where we are today. We have all heard that argument. It is just a matter of doing what we have always done in the past, only doing it better. We will get there this time.

At the same time, we are all aware of those who are advocating a complete abandonment of investment in the brokerage world in favor of using technology and the force of the new consumer to create and implement new life forms. They are called portals.

The more interesting question then is whether there are effective individuals advocating a brokerage business model that celebrates profitability and incorporates the new technology and interactive systems that create it. What might such a presentation look like?

A simple shareholder value argument might be the place to start. This position might seem radical in the face of the long-standing argument that only happy agents create broker profitability. Where should the priorities lie?

During the 1960s, corporate America saw a rise in a concept that became known as corporate responsibility. This theory suggested that corporations had responsibilities to not just its shareholders, but also to its community and the environment. Such became the test, and many corporations worked hard to become good citizens and stewards of the environment. Some even survived. Those familiar with the history of the American real estate industry might suspect that such an agreement of the minds also occurred with the agent being substituted for the community and the environment

Then, in the 1980s, the mood in American business changed and the concept of shareholder value began to move to the forefront. The essence of the shareholder value movement was that, while some peripheral issues had to be considered, the overwhelming priority of publicly held corporations was the creation and growth of shareholder value. Other players and entities could be responsible for the community and the environment.

Over the past thirty years, the debate outside of real estate has continued with shareholder value holding a decisive lead in the debate and in corporate operations. Successful corporations have used increasingly more effective public relations and media resources to spin their "citizenship" and "green" qualities, but behind the scenes it was all about shareholder value. In the real estate industry, "not so much."

Argument one: Let's go with the current winner.

Another way to evaluate the "agent centricity" decision is to consider how successful it has been. At this point in the discussion, some well-meaning soul will probably say, "Wait, perhaps agent centricity wasn't done that well, perhaps we could do it even better. Let's give it another chance." When this argument is presented, it should immediately be ruled out of order. Since the beginning of American business, no group has even come close to demonstrating a level of loyalty and selflessness equal to that of the American real estate broker towards its agents. It has been a complete and total commitment and sacrifice by some of the most competent and committed businesspersons on earth. No one could have done it better.

So how did this investment in agent centricity work out?

It turned out that there was never a rich enough commission split to satisfy. Imagine that during the heyday of the great boom, some brokers were actually paying out 125% commission splits. Despite this, and with few exceptions, brokerages became a revolving door.

Again, with precious few exceptions (every broker can name ten out of a thousand) there was little (and in some cases no) reciprocity with respect to either loyalty or the idea of building financially and culturally strong brokerage organizations capable of meeting everyone's needs, including the owner.

When in the late 1970s the industry was attacked by Boomer generation lawyers, there was little or no cooperation with the brokerage's efforts to implement risk management practices.

When the potentials of technology became evident in the 1990s, there was little or no effort to cooperate with brokerages, even those who were investing millions of would-be-profit dollars in trying to help the entire organization be more competitive.

The arrival of the Internet in the early days of the twenty first century was met by a similar refusal to play.

At the same time, the growing importance of data and information was deemed not appropriate for this group who favored their own sense of matters. "I don't need no stinking boss" was the favorite bumper sticker.

The same resistance and refusal met the emergence of social media a few years later.

The rise of the engaged consumer over the past five years has been largely ignored. The impact of these decisions is being reflected in both surveys and the consumer's current migration to the portals, a factor that will cost investor owned brokerages millions of dollars to counter.

To top off the list, many of these same individuals are currently engaged in highly destructive "off MLS marketing" practices. Some experts are now predicting that these practices will cause immense legal liability and lost opportunities for both agents and brokerages in the near term future.

Argument two: It hasn't worked!

In short, a strong argument can be made to support the conclusion that despite an investment of gargantuan proportions, the American real estate brokerage's efforts with respect to its agent community have not produced even a psychic return, let alone a market level financial return. Even more to the point is the fact that literally thousands of brokers are about to discover the ultimate truth of this effort as they struggle to sell their businesses and collect a well deserved retirement.

We now return to our regularly scheduled and hopefully enlightened board meeting.

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