Shareholder capitalism is anyt... Note
Fast Company

Shareholder capitalism is anything but good for shareholders

Kraft Heinz's new CEO paused a breakup and increased spending on marketing and R&D, signaling a shift from short-term financial gains. This contrasts with the company's past struggles, including massive write-downs and SEC investigations. The article critiques the prevailing notion of maximizing shareholder value (MSV), which prioritizes immediate stock price increases. This approach, influenced by ideas like Milton Friedman's shareholder primacy, has led companies to focus on short planning horizons and stock buybacks over long-term investment. Historical examples, like GM's decline after ignoring stakeholder concerns and the Vectura situation, illustrate the negative consequences of prioritizing shareholder interests above all else.The author argues that many investors are speculative and detached from a company's productive assets, leading to a short holding period for stocks. This "financial gravity" makes it difficult for companies to invest in the future, even when they know it's beneficial. The article presents examples of companies that have defied this trend by focusing on a clear mission or "center." Costco, Patagonia, Wegmans, Nvidia, and Progressive have achieved long-term success by prioritizing employees, customers, innovation, or core capabilities over short-term financial metrics. These companies demonstrate that a strong, consistent purpose, or "strategic centering," can guide decisions, justify investments in intangibles, build trust, and attract aligned investors. Boards can help escape MSV by defining their company's center, refusing quarterly guidance, extending executive pay horizons, reporting intangible investments, and exploring employee ownership.
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