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LEADERSHIP IS A PROCESS OF SOCIAL INFLUENCE, WHICH MAXIMISES THE EFFORTS OF OTHERS TOWARDS THE ACHIEVEMENT OF A SHARED GOAL.
Wednesday, March 31, 2010
Companies will increasingly drop their focus on maximising shareholder value in favour of longer-term goals because of the damage the financial crisis has caused to corporate reputations, according to the head of Britain's largest business lobby group.
Speaking at the RSA in London, Richard Lambert, director-general of the CBI, forecast that "Jack Welch capitalism" was "drawing to a close".
Mr Lambert said there was an increasing recognition among companies that the consequences of the financial crisis could be poorer relations between companies and the public and increased regulation. Therefore, he added, business leaders are gaining a greater appreciation of the fact that protecting their reputation can avoid these results, which threaten to impact the long-term performance of companies. This means an increasing focus on longer-term goals that aid suppliers, customers, employees and communities, as well as shareholders.
Mr Welch, a former chief executive and chairman of General Electric, was a champion of improving returns to shareholders in the 1980s, as US businesses faced up to the threat of competition from Japan. However, according to Mr Lambert, even he now believes shareholder value is "the dumbest idea in the world".
The CBI leader said: "If you concentrate on maximising value to shareholders over the short term, you put at risk the relationships that will determine your longer-term success. One of the strongest messages coming through from our member companies is their concern about business reputation, and the declining trust in business.
"They recognise that public confidence in business has been shaken by the events of the last two years. They worry that business is in danger of being seen as the problem rather than the solution.
"A positive outcome from all this, they suggest, will require a change of mindset, behaviour and communications."
For more, see - http://www.telegraph.co.uk/finance/businesslatestnews/7539653/Shareholder-value-no-longer-the-Holy-Grail-suggests-CBI-director-general.html