Shareholder Value: A Myth?

Home » Shareholder Value: A Myth? » Articles » Shareholder Value: A Myth?

“Shareholder value is the dumbest idea in the world.”—former GE CEO Jack Welch 

By Virgil Scudder

 

How many times do we hear it said on quarterly shareholder earnings calls or investor days?  The company did this, or that, to “enhance shareholder value.”  Not infrequently the action referred to is a take-over or merger.  But, since more than half of corporate mergers fail, it’s hard to see how shareholders, especially those in for the long haul, will see their value enhanced.  The share price may temporarily go up, making top management look good on an earnings call and increase the leader’s personal compensation, but at a cost to the company’s long-term well-being.

Lynn Stout, distinguished professor of corporate and business law at Cornell University, says running a company strictly to enhance shareholder value as measured by share price is harmful to “shareholders, employees, consumers, and our communities.”

She told IR Digest last year that, “American companies are disappearing.  There are 50% fewer publicly held companies than 15 years ago.  The life expectancy of large corporations has declined from 75 years in the 1920s to 15 years today and falling.  ROI, by many measures, has seriously declined over the past 20 years.”

So, she concludes, “This says to me that embracing shareholder value has not led to better results for shareholders as a class over time.”

Stout contends that “shareholder value thinking leads management teams to focus primarily on quarterly results and discourages the type of research and development and capital investments necessary for long-term corporate health.”

The Cornell expert sees corporate compensation as a key problem, saying: “As long as 80% of executive comp is tied to stock price, it will be hard to fix.  We’ve basically aligned management incentives with activists’ interests.”

So, the bottom line for journalists and shareholders is this: the next time a corporate leader says an action will enhance shareholder value, challenge both the facts and the premise.  The key question is this: “How does what you’re doing enhance the long-term success of the company?”

The answer may tell you whether management is thinking long term or short term.

 

71 Comments
  1. Pingback: ivermectin 6 mg tablets

  2. Pingback: buy ivermectin 3mg for humans

  3. Pingback: ivermectin 3 mg online

  4. Pingback: buy ivermectin 3 mg online

  5. Pingback: buy ivermectin 6mg for humans

  6. Pingback: canada cialis

  7. Pingback: how does hydroxychloroquine work

  8. Pingback: cialis at walmart

  9. Pingback: hydroxychloroquine buy online amazon

  10. Pingback: bahis siteleri

  11. Pingback: stromectol 6mg pills

  12. Pingback: stromectol france

  13. Pingback: buy stromectol online uk

  14. Pingback: tadalafil research chemical

  15. Pingback: tadalafil otc

  16. Pingback: how long for cialis to work

  17. Pingback: A片

  18. Pingback: order stromectol 6mg

  19. Pingback: ivermectin hydroxychloroquine azithromycin

  20. Pingback: hydroxychloroquine price

  21. Pingback: order kamagra 100 mg online

  22. Pingback: order cenforce 150mg

  23. Pingback: kamagra 100 mg oral jelly

  24. Pingback: vardenafil 40 mg med rx

  25. Pingback: fildena online

  26. Pingback: Are eggs OK with antibiotics hydroxychloroquine 200 mg for lupus

  27. Pingback: What helps your liver after antibiotics

  28. Pingback: How many beers are equal to a shot

  29. Pingback: Does Flexeril cause weight gain

  30. Pingback: How do people get diagnosed with depression

  31. Pingback: What triggers cardiovascular disease Lisinopril

  32. Pingback: how to dose Stromectol - What is the fastest way to cleanse your liver

  33. Pingback: 20 mg Cialis canada How do you make your ex miss you without talking to her | Buy Online

  34. Pingback: vidalista india fildena 100mg for sale

  35. Pingback: Azithromycin 250 mg tablets: Can you drink alcohol on antibiotics

  36. Pingback: Warum essen Asiaten so viele Eier - kamagra todesfalle

  37. Pingback: kamagra sildenafil citrate

  38. Pingback: C'est quoi la vie en famille pharmacie en ligne la moins chere

  39. Pingback: Quelle est la position pour avoir une fille meilleure parapharmacie en ligne

  40. Pingback: letrozole 2.5 mg uk

  41. Pingback: How do you make your ex miss you without talking to her?

  42. Pingback: When is a female most fertile?

  43. Pingback: stromectol 3mg scabies How do you activate brown fat cells to lose weight?

  44. Pingback: What age do you start looking old?

  45. Pingback: Can male sperm cause twins?

  46. Pingback: How do you make him feel guilty for hurting you?

  47. Pingback: How do you tell if a man likes you?

  48. Pingback: Is table salt good for infections define Hydroxychloroquine

  49. Pingback: What are the 4 dangers of taking antibiotics buy stromectol ivermectin

  50. Pingback: Qu'est-ce qui detruit une famille | acheter cialis en ligne

  51. Pingback: What tea is good for high blood pressure ivermectin stromectol

  52. Pingback: How to recognise and deal with an asthma attack ventolin 100 mcg

  53. Pingback: Is 500mg of antibiotics 4 times a day strong

  54. Pingback: What fruit is a natural antibiotic

  55. Pingback: Why are antibiotics called miracle drugs

  56. Pingback: What happens if you take antibiotics without infection

  57. Pingback: Do antibiotics make you forgetful

  58. Pingback: Do antibiotics hurt your immune system

  59. Pingback: What is the strongest natural antibiotic for humans

  60. Pingback: Why shouldn't you lay down after taking antibiotics

  61. Pingback: What to eat while taking antibiotics

  62. Pingback: What are 5 diseases caused by parasites guerison gale stromectol

  63. Pingback: What kills bacteria inside the body

  64. Pingback: levitra cost walmart

  65. Pingback: levitra on sale

  66. Pingback: Can I drink tea with antibiotics

  67. Pingback: how do you get viagra pills

  68. Pingback: Which antibiotics are high risk

  69. Pingback: Can antibiotics cause depression

  70. Pingback: Is 5 days of antibiotics enough

  71. Pingback: How do I know I need antibiotics