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The Purpose of the Corporation
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Christopher Halburd
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Businesses’ focus on maximizing shareholder value has numerous costs washingtonpost.com
COMMENTARY | Mantra of maximizing shareholder value has no foundation and dubious effects.
Like Comment (2) Unfollow Reply Privately8 days ago
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Ellen Stenslie likes this
2 comments
Peter Burgess
Peter Burgess
Founder/CEO at TrueValueMetrics
This article makes the case that the idea that maximizing shareholder value is something of a myth ... but I do not see reference to two important issues that influence decision making behavior.
- (1) at the top of the corporation, the C level executives get to keep their jobs if the Board of Directors like their performance. Since the Board of Directors and investors are closely connected (especially in the USA) then what is good for the investors is going to be good for the C-level decision makers.
- (2) within the lower managerial ranks, these people get to keep their jobs if their performance is what their superiors are looking for. Within most companies the only performance measurement that has real power is performance relative to the money budget and various money profit benchmarks. Other measures may exist, but they are minor relative to the money profit performance benchmark.
As long as this situation continues, any goal other than money profit and stockholder value is going to be of little importance.
I want to see a very different system of accounting become the norm in all business and for every economic activity. I want to see quantified metrics not only for the money profit performance, but also the impact on people and planet.
I argue that every economic activity is associated with an implementing organization, a financing organization, a place and a range of products. The economic activity has a result that can be expressed as (1) profit; (2) as impact on people; and, (3) as impact on planet.
These can be aggregated for the implementing and financing organizations, also for the place, and also for the product along its life cycle from the supply chain, through use to the post use waste chain.
The impact can be quantified using a system of standard values just as companies have standard costs in their cost accounting systems. Getting standard values right will be an iterative process, but right from the start a standard value is going to be better than treating value as unquantified or zero.
I am seriously concerned that in the talk about various aspects of management, sustainability, CSR, 'green' etc., there is little or no talk about the role of metrics in changing behavior. This to me is very worrisome because without metrics the talk will never do anything.
Peter Burgess, TrueValueMetrics
Delete 7 days ago
Marco Monfils
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Marco Monfils
Independent marketing and business advisor
A good read Christopher, thanks for sharing.
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