Jack Welch, the former darling of the US corporate world and prince of the concept of ‘shareholder value’, has turned against the idea in one of the most dramatic u-turns in management history. He recently described the concept of prioritizing returns for shareholders as ‘the dumbest idea in the world ... a result, not a strategy ... Your main constituencies are your employees, customers and products.’
This represents a belated recognition that, ultimately, all value is derived from investment in human capital – which is the philosophical point that lies behind the creation of the Human Capital Forum.
Simon Caulkin in The Observer, commented on 29 March: ‘As Welch rightly notes, share prices are supported by the value created in product markets by the inter-relationship of employees, customers and suppliers. So why should alignment run upwards from directors to shareholders?’
The same point was made at the Leadership Breakfast Seminar, hosted by the Human Capital Forum on 5 March. Guest speaker Bob Garratt said that, in terms of both commercial obligation and in law, the first duty of the Board members is to the company, not to the shareholders.
He called for quarterly financial reporting to be abolished. ‘The notion that you report every quarter and that every quarter has to be better than the last defies reality, and destroys the notion of an organisation learning through its mistakes. It just becomes this immense [reporting] machine.’
Professor Garratt called for a ‘cultural and behavioural’ transformation in executive priorities, now that the inverted logic that has passed for business common sense has now been exposed, but it remains to be seen if this will have the necessary effect on corporate behaviour.

Read Simon Caulkin’s article in full here:
http://www.guardian.co.uk/business/2009/mar/29/corporate-governance-moneyinvestments

All his articles are listed here:
http://www.guardian.co.uk/profile/simoncaulkin