110. Good shareholder value is not the same as good governance

I don't care how good your return to shareholders is...it doesn't mean you have good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

 

SCRIPT:

I’ve already talked about stakeholder capitalism vs shareholder capitalism a bunch of times on OMG – have a listen to episodes 5, 31, 48, 52, 56, etc. So I’ve already established pretty clearly that I believe organizations can and should make decisions that take into consideration the interests of a broad range of stakeholders – not just shareholders. So in the assessment of whether shareholder value and good governance are the same thing, that’s my stance. If you make decisions that generate value for shareholders without taking the interests of other stakeholders into account, I believe that’s BAD governance. What makes this a bit tricky is that there are jurisdictions – the United States, for example, where boards are *required* to prioritize the interests of shareholders. In other words, if the board makes a decision that benefits some other stakeholder at the deliberate expense of shareholder value, then they have failed to discharge their legal duty. I encourage organizations in the U.S. to remember two things. Even when the interests of shareholders seem at odds with those of other stakeholders, they probably aren’t. If you take time to generate multiple options and examine them through different lenses and different time horizons, there is almost always a path that benefits shareholders and, say, the environment. The other thing to consider is this: what if the rules are bad – and I’m not saying they are…? What if a change in the rules would be good for your organization, for your customers, for your employees, for your country, your society? There are lots of loud voices in the U.S. speaking up in favour of stakeholder capitalism. Maybe you could add your voice to the chorus.