Is Shareholder Value Thinking a thing of the past?

I’ve just got a link from McKinsey, the management consulting firm, to a recent statement of Bill George, Harvard Business School professor and former Medtronic CEO, on rethinking capitalism.

“I don’t subscribe to the notion that companies do exist to create value strictly for the shareholders. I think they are there to create value for the customers. … And ultimately doing that, they create value for the society.” (Bill George)

How clearly said! But unimaginable to hear something like this before 2008.

Has Shareholder Value thinking died?

Since Jack Welsh, the former CEO of General Electric who is seen as one of the most successful managers of the 20th century,  said in March 2009 in an interview with the Financial Times that “… shareholder value is the dumbest idea in the world” things have changed dramatically.

In January 2010 Roger Martin’s article “The Age of Customer Capitalism” got published in the Harvard Business Review. He proclaimed the the end of Shareholder Value Capitalism.

Then Steve Denning published a series on articles on the issue, e.g. “The dumbest idea in the world: maximizing the Shareholder Value“.

It seems that now we are back at the times when Peter Drucker wrote “There is only one valid definition of a business purpose: to create a customer.” And that was in – 1954(!).

Will Customer Value thinking become the new doctrine?

In fact, at the Global Peter Drucker Forum in Vienna in November this year much has been talked about purpose. In times of change “purpose provides a compass” (Steve Denning). Obviously, the old purpose seen as “maximizing profit/shareholder value” has led us into a structural crisis and now we are hard struggling to get out.

But abandoning Shareholder Value thinking implies a cultural change. Many, many questions are still open to be answered:

Will Customer Value in fact become the new mainstream?
What is the role of business schools and MBA systems?
What about management education?
What about big business and capital markets?
What about the governments and their educational as well as economic policy?
How to create an awareness for the need to change, how the necessary knowledge and abilities?
How to reach out to a critical mass of people?
Which in the end will be the new institutions?

And so on. We know, there is no direct switch to change the culture. We are rather in the middle of a long term process with uncertain outcome.




  1. Isn’t the European understanding that a company has to serve its stakeholders? Only when a company is there for all its stakeholders it serves the society.

    • Maybe shareholder value thinking vs stakeholder value was not the right debate. A company can only serve its stakeholders (including its shareholders) when its customers pay its invoices. In the longer run they will only do so when they receive something they value in return. In creating value in their core business for specific customers, companies serve society. As Peter Drucker long time ago said, that is what makes a business enterprise a “social institution”. That is their very purpose.

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