A friend told me on Monday about an idea he'd just read that in fact shareholders should be the least important of all in a company's consideration and the US/UK maximize share-holder value laws/attitude is actually damaging.
The gist of the argument was:
- Shareholders have no long-term investment in a company, they can easily move their money if they feel a company is performing badly. They can have little interest in long-term survival.
- Employees and suppliers do have long-term investment, have barriers to moving their commitment
Therefore you should discard the concept that a companies should maximize share-holder value and should instead incentivize companies to focus on long-term survival.
The example cited was GM, which did share buybacks instead of saving cash in boom times and then went bust because it ran out of cash in a recession.
I'm yet to read the book (which I can't remember the title now), but it sounds interesting and would be an effective counter to this concentration.
The gist of the argument was:
- Shareholders have no long-term investment in a company, they can easily move their money if they feel a company is performing badly. They can have little interest in long-term survival.
- Employees and suppliers do have long-term investment, have barriers to moving their commitment
Therefore you should discard the concept that a companies should maximize share-holder value and should instead incentivize companies to focus on long-term survival.
The example cited was GM, which did share buybacks instead of saving cash in boom times and then went bust because it ran out of cash in a recession.
I'm yet to read the book (which I can't remember the title now), but it sounds interesting and would be an effective counter to this concentration.