Shareholder Value is the Dumbest Idea in the World

shareholder value cartoon

“Shareholder value is the dumbest idea in the world.”
– Jack Welch, Financial Times March 13, 2009

“The job of a leader and his or her team is to deliver to commitments in the short term while investing in the long term health of the business… Employees will benefit from job security and better rewards. Customers will benefit from better products or services. Communities will benefit because successful companies and their employees give back. And obviously shareholders will benefit because they can count on companies who will deliver on both their short term commitments and long term vision.”
– Jack Welch, Business Week March 16, 2009

“We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”
– George Merck, speech to Medical College of Virginia, December 1, 1950

“We believe that our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. When we operate according to these principles, the stockholders should realize a fair return.”
– Robert Johnson, Chairman of Johnson & Johnson, 1943 J&J Credo

I’ve been re-reading all the pages I folded down in Obliquity by John Kay. It’s a book that never achieved widespread popularity but is worth reading.

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  • Jeff Rosenbaugh December 13, 2014 at 5:01 pm

    This is something I’ve been stewing on recently. I hate the comments that frequently escape the mouths of middle to senior management regarding increasing shareholder value as if that is a lead measure I can drive.

    Great perspective – excited to give this one a read.

    • derek December 13, 2014 at 6:44 pm

      I think you hit the nail on the head – it’s a high-level statement that is vague and not directly actionable. This brings to mind the example from Switch by Dan and Chip Heath where the nonprofit wants to increase child literacy prior to kindergarten. By creating an actionable message to “Read a book a day”, they accomplished their goal.

  • derek April 25, 2016 at 7:44 pm

    Here’s an Economist article praising shareholder value which is also worth reading: