Potentially Big News: Top CEOs Realizing That 'Maximizing Shareholder Value' Isn't A Great Idea
Found on Techdirt on Wednesday, 21 August 2019
Conceptually, maximizing shareholder value makes some sense, but only if you don't think about it for more than a few minutes. Because the whole thing falls apart as soon as you ask "over what time frame?"
Taking a longer term view suggests that "maximizing" profits in the short run is likely to create significant problems in the long run, whether it be competition or customers annoyed at you and the like.
Perhaps much bigger news is that the Business Roundtable, a gathering of top CEOs, has now put out a letter saying that shareholder value cannot and should not be the only focus of a corporation.
In the past the boss of a company either started it, or worked the way up from apprentice level. Today, managers who have no real background knowledge about the company itself get hired to maximize its value; then when everything begins to topple over, they leave and move on to the next victim; and with a resume showing how much success they had at previous companies.