Shareholder primacy theory baffles me. Shareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other corporate stakeholders. When you put the concerns of the shareholder over those of the employee or the customer, that just seems wrong to me. It seems to me if you take care of the employee, the employee will be happy and if the employee is happy that makes the customer happy and a happy customer is more apt to put their money in your register.
In the Army there was a saying, “Take care of the troop and the troop will take care of the mission.”
I understand that it is important to keep the shareholders at large companies like Disney or MGM happy so they will buy more $100+ shares yet if the workers are not happy customer satisfaction falls.
On the other side of shareholder primacy is a company like Zappos and SolarCity. Oh I am sure they are conscientious about what their shareholder’s concerns are yet I hear they are also take their employee’s job satisfaction to heart as well.
I believe shareholder primacy needs to be closely examined and rethought in any company that desires to be successful and relevant in years to come.
Do you think this business model is good for the company and/or the customer?
Let me know in the comments. I would love to hear from you!
To learn more about shareholder primacy theory read The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public today.