It’s not all just about shareholder return

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At many corporations today, company leaders have one overriding goal: the maximization of shareholder wealth.

The concept that corporate managers and executives should focus entirely on satisfying shareholders and maximizing shareholder value is a relatively recent concept, put forth by academic economists in the mid-1970′s. At the core of this belief is that shareholders own the corporation, so as such, all activities of the corporation should be instituted with the shareholders’ interest in mind.

Yet research shows that a single-minded pursuit of shareholder value can hinder a company’s financial performance over the long term. A company’s executive team also should also be devoted to maximizing employee and customer satisfaction. Sometimes leadership decisions satisfy customers, employees, and shareholders; other times the best decision puts employees and/or customers first and shareholders second in the short-term.

Studies show that high levels of employee satisfaction often lead to high levels of customer satisfaction and ultimately, high levels of company performance. With important decisions, it’s important for business leaders to look at problems and challenges from the perspective of not only shareholders, but customers and employees.