The Shareholder Value Myth

CHAPTER 6Keeping Promises to Build Successful Companies

We have just seen how, when stock market prices don’t capture fundamental value perfectly, the interests of short-term speculators conflict with those of longer-term investors. This chapter examines an even odder chronological tension: the conflict between shareholders’ initial interest in making commitments to stakeholders and to each other, and their subsequent interest in breaking those commitments later.

To understand the nature of the problem, consider Ulysses’s dilemma when he sailed the Odyssey past the island of the Sirens. The Sirens were beautiful women with compelling voices, but like many beautiful women they followed a strict diet: they used their singing to lure sailors to ...