Maximising shareholder value - an idea long past its sell by date.



Jack Welch, CEO of GE from 1981 to 2001, famously said in 2009 that shareholder value is


“the dumbest idea in the world. Shareholder value is a result, not a strategy... your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal...”


I can't help reflecting on this during the current cost of living crisis.


As well as enormous increases to energy prices, consumers will need to pay £2.7bn to cover the costs of 28 energy suppliers failing since June 2021, according to the National Audit Office. Another awful example of prioritising shareholder value is the £92m dividend being paid out to shareholders by Anglian Water, despite being prosecuted on numerous occasions for pollution incidents.


In 2019, an American business club, Business Roundtable (whose members include CEOs of Apple, Accenture, Intel, JP Morgan Chase and c. 180 more), released a statement entitled "Statement on the Purpose of a Corporation". Included was the following:


"While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders."


It goes on to commit to:


Delivering value to our customers

Investing in our employees

Dealing fairly and ethically with our suppliers

Supporting the communities in which we work


and finally


Generating long-term value for shareholders


"Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country."


In tough times previously, we've seen commitments to social and environmental aims diminished. This is not only wrong-headed but is also, ultimately, self-defeating. Pursuit of profits for their own sake is as pointless and poisonous as pursuing political power for its own sake (more on that in another post). The results of which are manifest for all to see.