A misleading obsession with share prices

Posted by in Management

I have been of the opinion that a total obsession with share price – and the associated view of maximisation of shareholder value is eroding the western economy faster than any other cause. One of the first lessons I learnt when I joined for my MBA was that good profits is a natural consequence of doing good business. But what we are seeing these days is everythign is being manipulated so as to achieve higher quarterly share prices.  A huge amount of research has gone into actually figuring out how the immediate management actions translate to increase in shareholder value.

The recent discussions on how US economy is growing but not jobs – I find it a bit ridiculous. The measurement of what economic growth is I think completely wrong. It has nothing to do with real economic growth, but more to do with the perceived economic growth, which is what the shareholder value is all about.

I read this article recently in Financial Times by John Kay. He talks very rightly about this situation.

Hope one day I can do a bit of research to prove my thoughts 🙂