Welch: Ignore Everything I've Ever Said (Except For This)

Remember maximizing shareholder value? Remember beating quarterly earnings expectations being the be-all-and-end-all of a CEO's job? Well forget it - at least according to Jack Welch, the deified former GE CEO credited with ushering in the shareholder value gospel. From the FT:

Jack Welch, who is regarded as father of the "shareholder value" movement, has said the obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was "a dumb idea"....

"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."

Now he tells us. No doubt Welch feels chagrined about the sorry state in which he left GE. While Welch managed to leave near the top, the accounting gimmicks he regularly employed to beat quarterly earnings expectations - particularly with the opaque GE Capital - have shredded investor confidence in GE's financial statements today. Oops.

It's worth noting that not everyone has bought into the shareholder value gospel. In the Washington Post, Harold Meyerson calls attention to the stakeholder model in Germany, where workers have meaningful representation on company boards, and long-term goals are prioritized over short-term ones, since German companies rely on retained earnings and banks rather than the markets for funding. It might be a model worth copying.