Shareholder Value
There may be no formal approach to stakeholder value maximization, but we all practice it in our daily lives.
Imagine an artificial intelligence (AI) built to produce as many paper clips as possible.
In whose interest should companies be run? Luigi Zingales shared his thoughts at the 2019 CFA Institute Seminar for Global Investors.
Is shareholder maximization the best way for a company to achieve sustainable success? Are there other parties who should be taken into account? Anjali Pradhan, CFA, tackles the issue in an interview with Robert Walker of NEI Investments.
They've been dismissed as "self-cannibalization," "corporate cocaine," a recipe for conflict of interest, and a form of stock price manipulation — not to mention short-sighted and counterproductive. But are share buybacks really that bad? We polled CFA Institute Financial NewsBrief readers to see what they thought.
Jame Montier made his case against shareholder value maximization during his closing keynote address at the 2014 European Investment Conference in London. In his characteristic iconoclastic style with a generous use of ironic humor, Montier labeled shareholder value maximization the way Jack Welch, the former CEO of GE, had once described it in 2009, as “the dumbest idea in the world.”
Rather than enriching themselves by buying back stock at prices near all-time highs, CEOs should instead reinvest in their businesses, including their employees. Doing so will drive long-term growth and sustainability for corporations and the economy at large, better balancing the interests of all stakeholders.
Berkshire Hathaway last paid a dividend to its shareholders in 1967, yet Warren Buffett extols the dividends the company receives. What gives?