The End of Shareholder Value

The Real Effects of the Shareholder Value Phenomenon and the Crisis it is Bringing to Business

Allan A. Kennedy

Publisher: Orion Business, 2000, 237 pages

ISBN: 1-84203-049-3

Keywords: Finance

Last modified: July 11, 2021, 3:03 p.m.

Over the past decade, we have witnessed a new phenomenom related to the purpose of business. One by one, company after company came to embrace a new driving purpose for its activities: shareholder value. This new ethic for business has driven share prices higher and made millions of investors richer. It has altered dramatically the way managers are rewarded, as executives compensation schemes shifted more of the manager's future earnings into stock options, thus aligning the interests of managers to those of shareholders. And the shareholder value principle enabled a new breed of investment banker — the leveraged buy-out (LBO) banker — to make enormous amounts of money by buying out companies, restructuring them to operate along shareholder value lines, and reselling them other investors. As a measure of a company's worth, and as a means of managing its operations, the shareholder value principle rules.

Or so it seems. For a powerful backlash is now forming against those companies seeking to maximize shareholder value. This backlash is being lead by stakeholder groups— employees, customers, government, suppliers — who have been vitimized by the excesses of the shareholder value era. Downsizing, rationalization, constant mergers and acquisitions, costs squeezing, short termism, — the carnage across the corporate landscape caused by the pursuit of higher share prices has crisis-like implications for the future of business.

The End of Shareholder Value is a disturbing and eye-opening look at the real effects of the shareholder value phenomenon. Written by one of the world's leading business thinkers and writers, it describes the changes in the corporate environment that will force companies to rethink the primacy of shareholder value as a driving purpose. Not surprisingly, these changes are occuring within the groups of stakeholders who have suffered from this purpose.

Kennedy examines the changing relationship between corporations and employees, government, customers and suppliers. The change occuring within each major stakeholder group, in effect, are defining a new agenda that business will have to respond to if it is to prosper in the years ahead. Kennedy looks at how companies can redirect themselves towards a sustainable future based upon the creation of wealth for all important stakeholders, not just the investors.

  • Part 1: The Changing Purpose of Business
    1. Business in the Nineteenth Century: Families and Financiers
    2. The Technocratic Revolution
    3. Business as a Hobby; Money as the Goal
  • Part 2: The Impact of Shareholder Value
    1. Mortgaging the Future
    2. New Economy or False Dawn?
  • Part 3: Stakeholder Response
    1. Employees Strike Back
    2. Government Tightens the Screws
    3. Supplies Circle the Wagons (or Get Picked Off)
    4. Customers Vote with Their Feet, Pocketbooks, Voices…
  • Part 4: An Agenda for Change
    1. What Went Wrong and Who's to Blame?
    2. New Marching Orders for Management
    3. Taking the Boredom out of Board Work — Forever


The End of Shareholder Value

Reviewed by Roland Buresund

Good ******* (7 out of 10)

Last modified: May 21, 2007, 3:25 a.m.

A very interesting attack on "shareholder value". Worth reading if you're interested in the subject.


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