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Former General Electric CEO Jack Welch has declared corporations’ pursuit of shareholder value above all else “the dumbest idea in the world.” With shareholder values generally in free fall as multinationals and even nations teeter on the verge of financial collapse, the founder of the shareholder-value cult tells the Financial Times such share-price worship was wrong all along. ”The idea that shareholder value is a strategy is insane,” he says. Welch explains: “Shareholder value is a result, not a strategy. … Your main constituencies are your employees, your customers and your products.”
But his late change of heart is getting a worse reception than even high-stakes swindler Bernard Madoff’s tardy mea culpas in court Thursday. Welch’s comments on “how ‘dumb’ the concept of shareholder value is is like Isaac Newton muttering about how idiotic gravity is,” observes The Deal.com.
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3 Comments »
Comment posted March 13, 2009 @ 3:36 pm
Leave it to TheDeal.com to position economic philosophy as though it were physical science.
Gravity is not a choice. Private property, markets, and currency are all philosophical constructs that are different in all cultures and across all periods of time.
Comment posted March 13, 2009 @ 3:45 pm
Wow. And out of the other side of his face, old man Welch is crabbing about Obama and administration “demonizing Wall Street and shareholders.”
This guy is, has been, will always be “Neutron Jack.”
Comment posted March 14, 2009 @ 8:44 pm
I think “neutron jack” was misunderstood. I’ve never cared for the fellow’s ideas myself but he seems to be repudiating them himself here in the sense that he’s saying the maximization of shareholder value as an end in itself is wrong. What he’s saying is that it’s insane to make shareholder value i.e. stock value, the be all and end all of your corporate existence. Employees, your product and your customers need to be first. The shareholder’s value is maximized when your the goals are focused on your employees, your product and your customers. That’s pretty conventional corporate marketing theory. And in that he’s right and is probably coming as close to an admission of being wrong as you’re ever going to see from a guy like Welch.
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