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A rational approach to shareholder value

01 September 2014

A rational approach to shareholder value - read more

There is a fundamental flaw in the current understanding of the concept of shareholder value

For many years, directors of quoted companies have declared that the primary objective of their company is ‘to maximise shareholder value’. Interestingly, however, they never explain how it fits into corporate governance, in terms of:

  • how the objective is translated into a decision making criterion
  • how they monitor their achievement in this regard
  • how they explain variations over time

Ask such directors to define shareholder value, and the majority will say that it equates to...

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