Boardroom ignorance: How maximising shareholder value destroys wealth – Ted Black
Ted Black has a rare talent: he can demystify accounting ratios and unpick the theories that are held dear in business schools to set out where business operators are going wrong. And, equally important, he doesn't just criticise – he sheds light on how to change emphasis. Black has a focus on Return on Assets Managed (ROAM). In this article, part II of a series on how mismeasurement leads to mismanagement of firms, Black looks at how the mantra of maximising shareholder value can have the opposite effect. Useful ideas to consider as you reshape your business plans to survive and flourish in a world that's been given a major overhaul by the Covid-19 pandemic. – Jackie Cameron
The deadly virus of mismeasurement
By Ted Black*Â
Last time we looked at the "Germ Theory of Management" and linked it to production in a timber company. It showed how a system designed by management can make even the brightest and most talented of people who work in it act stupidly and perform ineptly. Let's now look at the way a business ideology – maximising shareholder value – causes mismeasurement and mismanagement of firms.
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