So, long before I was a denizen of the Heart of Corporate America, like many of you I shared a great deal of suspicion and concern regarding how business is conducted.
Conventional wisdom has it that the goal of business is to maximize the return to its stockholders, and the quarterly earnings report is the clearest, most significant measure of success meeting this objective.
Humbug! A wonderfully cogent column in the current Business Week by consultants and academes Clayton M. Christensen and Scott D. Anthony puts it this way:
“The notion that managers must above all appease investors drives behavior that focuses exclusively on quarterly results. Thus, many management teams hesitate to invest in promising innovations that are likely to hurt near-term financial performance. As a consequence, leaders in industries facing disruptive change-such as grocery retailing and newspapers-lose both direction and strength as they try to figure out what kind of shareholder value they should create….
Perhaps it is time for companies to adjust the paradigm of management responsibility: “You are investors and speculators, not shareholders, and you temporarily find yourselves holding the securities of our company. You are responsible for maximizing the returns on your investments. Our responsibility is to maximize the long-term value of this company. We will therefore act in the interest of those whose interests coincide with our long-term prospects, namely employees, customers, the communities in which our employees live, and the minority of investors who plan to hold our securities for several years.”
How refreshing! Now, let it be said that the particular HCA in which I toil is, due to the nature of its calling, less guilty of the typical 90-day shortsightedness than many, but still seems to expend much effort painting pretty pictures for “the Street” based on that artificial cycle.
Remember the fad of hearkening to a company’s “stakeholders?” They might not be referred to that way any longer, new buzzwords long since having supplanted it, but Christensen and Anthony define the term perfectly (and it bears repeating): “namely employees, customers, the communities in which our employees live, and the minority of investors who plan to hold our securities for several years.”
Of course, what do we suckers know? We’re the ones with retirement plans and 401k’s and pensions, investments that by definition are for the long haul. The sharks who sell them to us, the ones whose bonuses every year are measured in six or seven figures, they buy and sell like crazy. Not a comforting scenario. But, then I’m cool with my retirement plans. Age 90, not a day before.
It’s it for now.
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