Shoot that term in the head – Part 1 – “maximize shareholder value”

This post by Julien Smith on the perils of saying “I love you” inspired today’s post, the first in a new video series called “Shoot that term in the head.”

In business there are sorts of fucked up and vague terms that people use as ways to obfuscate, betlittle, exploit, justify bad behaviour, or conduct other nefarious operations. The “Shoot that term in the head” series looks at these expressions, explains why they should be sent to the glue factory and proposes alternative ways for managers to communicate with a variety of stakeholders.

The first term I dissect is “maximizing shareholder value.” It has been en vogue since the early 80’s thanks to guys like Jack Welch. As reported in Harvard Biz Review, during the fixation with sharholder value era, shareholders, on the whole, earned lower returns. Jack Welch sure as hell earned nice ones though.

Succinctly stated, “Maximizing sharholder value” should be shot in the head because:

How do we know when “shareholder value” is “maximized?” Can it ever be? The answer is that the concept is immeasurable. Whenever “shareholder value” is “maximized” unicorns fly into the Boardroom and deliver power points on how the next quarter will be far doper and feature a new management team led by a garden gnome.

What types of behaviour are permissible in the quest to achieve ever more maximization of shareholder value? Is it OK for me to staff a factory in Bangladesh with ten year olds from rural villages so that I can really cut costs? What about if I want to dump waste in a village in the Russian Far East and contaminate folks lungs because this a great way to generate ‘above market returns’? We’ll never know…

Which shareholders get the pleasure of “maximum value?” Those with preferred stock? Common stockholders? Those who have multiple voting shares?

Enough of my ramblings! This is a video post, so watch! And then leave a comment telling me what you think. Are there other terms you hate that are nebulous and nasty and should be banished from the business lexicon?

[youtube]<object width=”425″ height=”344″><param name=”movie” value=”http://www.youtube.com/v/_tpKLpgYfAU&hl=en_US&fs=1&”></param><param name=”allowFullScreen” value=”true”></param><param name=”allowscriptaccess” value=”always”></param><embed src=”http://www.youtube.com/v/_tpKLpgYfAU&hl=en_US&fs=1&” type=”application/x-shockwave-flash” allowscriptaccess=”always” allowfullscreen=”true” width=”425″ height=”344″></embed></object>[/youtube]

One Comment

Leave a Reply