For a long time I've had some serious issues with CEOs putting such a focus on the stock price instead of customer satisfaction. I've usually figured that I was an outsider, too ignorant of how economics or how business works to know any better.
In fact, there was a time (about 5 years ago) that I was seriously considering going for an MBA so I could understand this all better. However I realized that what I really wanted to do was wait for various principles to be explained (like, "focus on shareholder value") and bring up my all my counter-examples. That's not a good reason to get an MBA.
I suffered through the 1990s when most companies started adopting this mentality. A lot of people today don't realize there had been a time when "shareholder value" wasn't the top priority of most businesses. There was even a time when that wasn't even a phrase people used! In the 1990s it became important to "align the average employee's priorities with that of the CEO" therefore we all got stock options. I saw managers at Bell Labs do things that otherwise would be considered stupid and harmful but with these new incentives "it's what we'll have to do".
Meanwhile I keep seeing examples of companies that don't focus on "maximizing shareholder value" doing really well: Apple for example. I'm glad my current employer focuses on "putting the customer first".
So, it turns out I'm not the outlyer. Other people, all smarter than me, have been writing about this too. Now Forbes Magazine, not exactly a bastion of socialist thinking, has published this article that (1) captures a lot of what I've been trying to express, (2) gives 3 specific legislative changes that would turn things around.
The Dumbest Idea In The World: Maximizing Shareholder Value
His recommendations include:
Repeal the 1995 Private Securities Litigation Reform Act
Eliminate regulation FASB 142
Eliminate the use of stock-based compensation as an incentive
Read the article for the details.
Tom
"I'm glad my current employer focuses on "putting the customer first"."
Really? REALLY?
I know a great number of victims of the Nymwars who would beg to differ.
Alternately, sure, as long as you recognize that the 'customer' is the advertiser.
Their products are still good. I still use them. But really, I know they don't give a DAMN about me as customer.