Lars Pind

internet software, coaching, and entrepreneurship

Lars Pind - internet software, coaching, and entrepreneurship
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Christensen: CEOs should not maximize shareholder value

January 10, 2006 · See comments

Clayton Christensen: “Their time horizon is shorter than even that of even the shortest-term managers. So I don’t think it’s right to think of [these investors] as shareholders of your company. They’re investors who temporarily own securities in your company at a particular point in time. They’re responsible for maximizing the stock value of their investments. You as the CEO are responsible for maximizing the long-term health of your company. “

It’s good to hear some common sense in this department, after many years of the maximizing shareholder value mantra.

Seems there’s a parallel to the current debacle over the sales of Danish TDC: Should we manage for short term profit or long term growth? Here, management is voting for the short term, while one of the main investors (5.5%) is taking the long term view.

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Comments ↓

  • 1 Jayson // Jan 17, 2006 at 09:51 PM

    I'm sure the maximizing shareholder value mantra is perpuated by some of the largest shareholders themselves...the CEO's. It seems a bit idealistic for Christensen to think that the CEO's care about the longevity of their company more than their own brokerage accounts.

  • 2 Klaus // Jan 18, 2006 at 02:38 AM

    Clayton Christensen is one of the reasonable people from HBS, I recommend his laterst book on innovation (which isnt that new anymore, but still worth a read).