Shareholder Value and Financialization : Consultancy Promises, Management Moves

Abstract

Although shareholder value is the mantra that jumps out from the pages of the daily financial press, it is often a loosely defined and rhetorical concept, subject to little empirical study. It is also a powerful concept, originating in and finding identification with business consultants and promulgated via a series of metrics, implementation and incentive packages and a promise that purposive management action will be rewarded. This paper begins its analysis of shareholder value with the consultants who promote it, before turning to academic responses. The paper then presents empirics on microperformance and the meso limits to shareholder value which identifies gaps between what the consultants promise and the capital markets demand, and what corporate management can deliver. In the final section the paper argues that the process of financialisation, of which value based management is a part, is a contradictory one. Although attempts to increase shareholder value must disappoint at a meso and macro level, the persistent gap between expectations and outcomes can drive a series of management behaviours which do change the world.