13 March 2009

Jack Welch and shareholder value

TT Ram Mohan has a post criticising Jack Welch's recent outburst on 'shareholder value' being irrelevant. I fully agree with his critique of the otherwise brilliant man:

"I wouldn't have minded if he had put forth sound arguments for his contention. I can't see any. Welch says:

On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.
Tell me, does that sound terribly original? Has any worthwhile CEO claimed that shareholder value creation was a strategy? Not at all. CEOs merely focus on it as the objective. Now I know that lots of academics and practitioners think there is something terribly wrong with this objective- I wrote about this in an earlier post. But none has come up with a worthwhile substitute for it."

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