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Rethinking Business: Value Over Shareholder Gains
3 Aug
Summary
- Maximizing shareholder value is a recent, false doctrine.
- Enduring success stems from creating customer value, not short-term profit.
- Historical successes like Wedgwood focused on customer accessibility and trust.
The long-held business doctrine that firms exist solely to maximize shareholder value is being re-examined. While profits are necessary for survival, this narrow focus is argued to be a recent ideological anomaly rather than a timeless principle. Historically, enduring commercial successes, dating back to the 1770s with Josiah Wedgwood, were built on creating extensive customer value.
Wedgwood pioneered modern branding by making refined ceramics accessible to a growing middle class, emphasizing customer loyalty over per-transaction margins. Similarly, Procter & Gamble, in the 1850s, cultivated household trust through consistent quality with products like Ivory soap.
Even late 19th-century industrialists, despite aggressive tactics, expanded access to essential goods like steel and oil by lowering prices for the general population. Their efforts, though labeled controversially, led to vast supply increases and reduced costs, benefiting society broadly.
