For CdM: On Shareholder Value

[Neil]

So then the solution sounds pretty easy:  Legislate a ban on stock options for executives.  That way, they can focus on their work rather than their current occupation of destroying the company for the sake of a few cents per share.

[MadImmortalMan]

2)  The problem is that what is considered "shareholder value" is just a short term profit-taking, and investors are too stupid to price in the long-term damage appropriately.

I agree with this 100%, if you compare the United States to other OECD countries the way our corporations are run are very often ruinous to long term investors. There are some exceptions, but it is one reason I might favor more pressure to create new types of ownership models where outside shareholders are entitled to significant voting rights and the profits, but then there are special classes of ownership for employees and etc that guarantee them some level of voting power and etc. It's not so much an employee rights push ala German companies, but just the belief I have that companies with employee ownership/control of at least some board seats would be more likely to work to the long term interests of the company (which should also be to the long term interests of the shareholders.) Long term investor's interests won't always align with those of employees but I think a good stable, long term investment generally grows employment and compensation over time. Some moribund companies need employment cuts, obviously, and then I would prefer a company be structured so that can happen and employees can't block it.

Back in the days when what was good for the country was good for GM, we didn't have the crazy trading volume and algorithms running several hundred trades per second. These guys fear for the stock price so much because the damn algos can rip them to shreds in the blink of an eye. In blocks of millions of shares at once. Back then, the average shareholder was some dude who believed in the company and held the stock for years at a time.

More than increasing short-term cap gains taxes or anything else, the one thing that would do the most good in this regard would be to require every trade on NYSE, Nasdaq, CME, etc to occur by the click of a human finger.

[Admiral Yi]

The real irony surrounding this focus on maximizing shareholder value is that it hasn't, in fact, done much for shareholders.
Roger Martin, the outgoing dean of the Rotman School of Management at the University of Toronto, calculates that from 1932 until 1976 — roughly speaking, the era of "managerial capitalism" in which managers sought to balance the interest of shareholders with those of employees, customers and the society at large — the total real compound annual return on the stocks of the S&P 500 was 7.6 percent. From 1976 until the present — roughly the period of "shareholder capitalism" — the comparable return has been 6.4 percent.

Interesting choice of start date for the first period.

[DGuller]

The real irony surrounding this focus on maximizing shareholder value is that it hasn't, in fact, done much for shareholders.
Roger Martin, the outgoing dean of the Rotman School of Management at the University of Toronto, calculates that from 1932 until 1976 — roughly speaking, the era of "managerial capitalism" in which managers sought to balance the interest of shareholders with those of employees, customers and the society at large — the total real compound annual return on the stocks of the S&P 500 was 7.6 percent. From 1976 until the present — roughly the period of "shareholder capitalism" — the comparable return has been 6.4 percent.

Interesting choice of start date for the first period.

[The Minsky Moment]

The real irony surrounding this focus on maximizing shareholder value is that it hasn't, in fact, done much for shareholders.
Roger Martin, the outgoing dean of the Rotman School of Management at the University of Toronto, calculates that from 1932 until 1976 — roughly speaking, the era of "managerial capitalism" in which managers sought to balance the interest of shareholders with those of employees, customers and the society at large — the total real compound annual return on the stocks of the S&P 500 was 7.6 percent. From 1976 until the present — roughly the period of "shareholder capitalism" — the comparable return has been 6.4 percent.

Interesting choice of start date for the first period.

The second date is just as interesting.  The S&P enjoyed a nice rebound in 1976 as the OPEC crisis abated and closed over 400.  It then took a nosedive it did not get back to that level for almost 10 years.
the second period really requires manipulation because there has to be some way of suppressing the impact of the massive Reagan and Clinton era bull markets.