Propono (Latin): to put or set forth, to set or lay out, to offer, to place before, expose to view, display, point out, declare, represent, report, say, relate, set forth, publish, etc.

Thoughts and posts on a wide variety of topics: current events, family, politics, religion, culture, academics, science, technology.

Propono, ergo sum?

Monday, May 21, 2007


Interesting column in the most recent issue of Business Week by Clay Christensen, about reevaluating the notion that managers' primary obligation is to increase shareholder value, pointing out that, in today's world, most of those "shareholders" do not really share managements' long-term concerns about the company. Instead, he submits, managers ought to act in the interest of other long-term stakeholders, viz. employees, customers, communities, and long-term shareholders.

Good perspective, that I think needs more focus in today's quarterly-results driven world.

From the BW piece:

Why do smart, motivated, hardworking managers find it so difficult to innovate? Here's one key culprit: the belief that management's primary obligation is to maximize shareholder value. That credo, which is shaky to begin with, distorts managers' sense of responsibility. And in fact it has been rendered obsolete by developments in the capital markets.


Perhaps it is time for companies to adjust the paradigm of management responsibility: "You are investors and speculators, not shareholders, and you temporarily find yourselves holding the securities of our company. You are responsible for maximizing the returns on your investments. Our responsibility is to maximize the long-term value of this company. We will therefore act in the interest of those whose interests coincide with our long-term prospects, namely employees, customers, the communities in which our employees live, and the minority of investors who plan to hold our securities for several years."


Anonymous andy said...

This is a viewpoint that I share strongly. Luckily, I work for a private company that has been in business for more than a century and always takes the long view. It is a great luxury in today's world to be able to focus on what it right for the next five, ten, or twenty years rather than the next five, ten, or twenty days. Working in my current job has solidified my belief that spending too much time listening to the Street can drive a business in exactly the wrong direction. Thanks for sharing this article.

7:08 PM


Post a Comment

<< Home