Wednesday, March 18, 2009
POLICY: Financial Times Newsflash! "Dumb idea" for executives to focus so heavily on quarterly profits, says early disciple of original concept.
JACK WELCH'S NEW PERSPECTIV: " Shareholder value emphasis misplaced'... The Financial Times (13 March 09) reported that Jack Welch, long associated with the "shareholder is king" ethos-also known as the "shareholder value movement"--now says it was all a big mistake. This corporate philosophy was quickly adopted in boardrooms across America in the '80s and spread like a corporate virus around the world, following a famous and well reported speech Welch delivered at the Pierre Hotel in NY in 1981. Some attribute the financial chaos circling the globe today to business and Wall Street putting profit before people-customers, employees and communities. Selling subprime mortgages to unqualified customers who had no hope of repaying them, in the name of 'shareholder value,' caused this ill-founded house of cards to collapse, and with a crash. Now, almost 30 years later, Jack says it was all a big mistake. Welch said at a recent conference on the future of capitalism that it was "a dumb idea" for executives to focus so heavily on quarterly profits and share price gains. The former General Electric chief told the Financial Times the emphasis executives and investors had put on shareholder value after his speech - was misplaced. Looking at my RRSPs daily, along with millions of others, can't help but thinking, "We're not alright, Jack!"
Posted by DarcyRezac at Wednesday, March 18, 2009