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Shareholder Value is a Result, Not a Strategy

Shareholder Value is a Result, Not a Strategy

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In Motley Fool Stock Advisor, David Gardner writes about a idea from 1970 that changed the business culture at large:

“In 1970, Noble Prize-winning economist Milton Friedman wrote a famous article for The New York Times Magazine, decrying the idea that businesses should have any sense of social responsibility.  Their responsibility, he said, is to increase shareholder wealth to the greatest extent possible – pure and simple.  It was an incredibly influential idea that became common wisdom and is in large part responsible for much of the business culture we see today.  The problem is it was completely and transparently wrong.”

David then follows up with words of wisdom from Jack Welch, Former General Electric CEO. 

Here’s what Jack said in an interview back in 2009:

“On the face of it, shareholder value is the dumbest idea in the world.  Shareholder value is a result, not a strategy … Your main constituencies are your employees, your customers, and your products.  Managers and investors should not set share price increase as their overarching goal.”

It’s a great reminder to set overarching goals that matter.

Then great results are a by-product.