

Is "Long-Term Shareholder Value" The Answer? - DanielRibeiro
http://www.forbes.com/sites/stevedenning/2012/06/29/is-long-term-shareholder-value-the-answer/

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carsongross
Pay dividends.

The titular "owners" of companies should receive the "profits" created by
those companies. Until that happens, "owners" (oh, they can issue new shares
at their discretion, didncha know?) will be beholden to an irrational, short-
term and easily manipulated stock price based on nothing but scuttlebutt and
abstractions like earnings yield.

If a company is paying a fat dividend, you, as the owner, start caring about
the long run a _lot_ more. If they miss a growth target... well, you've got
your dividend. You don't care as much about it, so long as it is a short term
issue and not putting the money machine at risk.

It would do a lot to reign in absurd executive compensation, too.

OTOH, Wall Street hates it because they don't get any vig on a dividend
payment.

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dwc
_> Because the new approach makes more money, its triumph is inevitable._

If only this were true, then the current problems would never have arisen.
This _new approach_ isn't wholly new. He quotes Peter Drucker and mentions
Toyota, after all. Otherwise the observations seem largely correct, and I can
believe in a shift where people again begin to believe in this sort of
approach.

~~~
drucken
This is actually a very old idea, but seemingly still quite new to many
American companies and US MBA programmes.

Several non-Anglo American corporate cultures and capitalist systems have
always worked like this or done so for a long time. For example, the Swiss,
German and Japanese home-grown companies.

The failure of the SVM model was made high profile due to two quotes from
General Electric's former CEO, Jack Welch across a time-span of approx. 30
years.

It is only now, perhaps also as a result of the financial crisis, that the
negative synergy inherent to the "Unholy Trinity" of:

1\. Debt as a vehicle for growth (applies to economies too),

2\. Excessive executive total compensation (including growth of professional
shareholder class),

3\. Shareholder Value Maximisation,

is becoming clear.

As hinted above, other systems focus on, e.g. generating customer value and
cash first, executive compensation tightly linked to both company performance
and compensation levels within the firm, shareholders take a backseat or are
strongly tempered by long-term stakeholder interests, etc.

Oddly enough, some of the most successful US companies generally already
follow or followed these customer value and cash-flow oriented principles from
the start. For example, the tech companies, Apple, Microsoft and Google.

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kjhughes
Do not miss the link to Denning's prior review of Roger Martin's "Fixing the
Game",

[http://www.forbes.com/sites/stevedenning/2011/11/28/maximizi...](http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-
shareholder-value-the-dumbest-idea-in-the-world/)

where he explains why _maximizing shareholder value_ is misguided.

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antidoh
These are the companies I want to buy from. Long term.

