Shareholder or stakeholder?

Dear reader,

During many years, companies have put the so-called shareholder value in the centre of both their planning and operational activities. As so often in Germany, this idea was imported from the USA, where large institutional investors demanded companies to define the interests of shareholders as the focal point of their corporate activities. What was beneficial to share price and dividend, deemed be well. This was the credo of those shareholder value fetishists in the sect of stock exchange worshippers. Other interests were to be neglected.

During the last decade’s big financial and economic crisis, suspicion grew that fixation on shareholders’ interests were not the ultimate wisdom. And indeed, it was one of the protagonists of this very idea who was now leading the group of critics. Already in 2010, General Electric’s CEO Jack Welsh said:”strictly speaking, shareholder value is the world’s most stupid idea.” This statement struck the corporate world like a bomb, as Welsh shook a schism which was hammered in to all executives over years. The “Süddeutsche Zeitung” daily newspaper then wrote that his statement was comparable only to the pope’s leaving of the Catholic Church.  

Ralf Dahrendorf, the great liberal sociologist and publisher agreed with Welsh:”shareholder value is not everything; companies do not exist solely for their shareholders.” Indeed, one-directional orientations in a multi-directional economic environment proved to be rather silly. Who stores a ship’s entire load on one side may not be surprised if he or she sinks it to the seabed during brightest sailing conditions and a smoothly rolling sea. Similarities with dramatic imbalances of companies, which were solely adhering to the shareholder value approach, are striking. Their wrecks are found on the seabed of the global corporate history’s wide ocean.

An alternative to this idea is stakeholder value. This approach, too, views shareholders’ interests, however brings it in a reasonable balance with other claimants such as employees, customers, the society and politics. A company which works against its stakeholders or ignores them will fail to have sustainable success. Stakeholder interests need to play, thus, a crucial role already at the drafting stage of a corporate strategy.

With regard to employees, this means that personnel aspects have to be a mandatory element in any corporate strategy. It is not sufficient to confess again and again, that employees represent the company’s most important asset. We need to act in this way, too. However, this is only successful, if we consider every employee not as an item of corporate activity – or as a human resource unit on an Excel sheet – but approach her or him, respectively, with respect and appreciation by acknowledging the person’s entire individuality. Our employees are entitled to a claim in terms of appreciation and attention. That’s all about in this issue of the “Perspektiven“ magazine.

Wishing you an inspiring reading.


Ulrich Goldschmidt