8.

THE TRAP OF SHAREHOLDER VALUE

On the face of it, shareholder value is the dumbest idea in the world.

—JACK WELCH1

“Imagine an NFL coach,” writes management guru Roger Martin in Fixing the Game, “holding a press conference on Wednesday to announce that he predicts a win by 9 points on Sunday, and that bettors should recognize that the current spread of 6 points is too low. Or picture the team’s quarterback standing up in the postgame press conference and apologizing for having only won by 3 points when the final betting spread was 9 points in his team’s favor. While it’s laughable to imagine coaches or quarterbacks doing so, CEOs are expected to do both of these things.”2

Imagine also, extrapolating the analogy, that the coach and his top assistants ...

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