Is Shareholder Value 'the dumbest idea in the world'?

Speaking with the Financial Times earlier this year, Jack Welch, who is regarded as the father of the “shareholder value” movement that has dominated the corporate world for more than 20 years, said it was “a dumb idea” for executives to focus so heavily on quarterly profits and share price gains...

... “On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products...”

In a subsequent article in BusinessWeek, he said:

'It's obvious that strategies are what drive a business. You might, for instance, have a strategy around innovation aimed at producing the leading products in every cycle, or you might have a strategy to become the low-cost global supplier, or you could have a strategy to globalize a company, taking its strengths in one market and translating them to every market. But you would never tell your employees, "Shareholder value is our strategy." That's not a strategy you can touch. That's not a strategy that helps you know what to do when you come to work every day. It doesn't energize or motivate anyone.
 
So basically my point is, increasing the value of your company in both the short and long term is an outcome of the implementation of successful strategies...the job of a leader and his or her team is to deliver to commitments in the short term while investing in the long-term health of the business. Bottom line: That's management. Good managers know how to eat today and dream about tomorrow at the same time. Any fool can just deliver in the short term by squeezing, squeezing, squeezing. Similarly, just about anyone can lie back and dream, saying, "Come see me in several years, I'm working on our long-term strategy."
 
Neither one of these approaches will deliver sustained shareholder value. You have to do both.'

Is Shareholder Value 'the dumbest idea in the world'?