Shareholder Value

I read a fab article written by Andrew Hill in the FT online yesterday:

Find it here.

Then let me quote the key phrase:

The blinkered drive for shareholder value and the rewards it can generate for those who lead it have turned CEOs into excellent managers of expectations rather than tangible corporate performance. One study suggests a majority of managers would avoid starting a project that would create positive net present value – in other words, one that should improve shareholder value in the long-term – if it meant missing their next quarterly earnings targets.

Wow.

So that's good isn't it?

One hardly knows what to say... and Mr Hill says a lot of it well enough, so rather than plagiarise him I reccommend going to have a read.

But I do have a question.

Is it really investors who drive this behaviour? Or is it the investor's representatives??

If I invest in a fund, the fund manager will tell me that the value of that fund can go up and down; that past perfromance...yada yada... you know how the spiel goes! The fund manager wants his clients to have a long term view. The fund manager wants his client's to believe in their ability to beat the market over a time horizon that isn't measured in quarters but in years.

Cool.

So who is it who is telling the senior management of a business that they are history if they don't meet a quarterly target? Well its the fund managers, via analysts.

The longer I stay away from the market, the more nonsensical it all looks.