July
3
Customers and Employees First: Not Stockholders
This Time story about two retailers, John Mackey and Kip Tindell, who don't place much stock in worrying about their shareholders, made me wonder if their insight might not apply to the movie biz as well.
Here's a snippet:
"Simultaneously we hit upon the philosophy that I think will be the dominant philosophy in business in the 21st century," Mackey says. "It's this principle that the purpose of business is not primarily to maximize shareholder value." That's a little like saying the purpose of religion isn't to achieve salvation. The idea that corporations exist to please their owners, the shareholders, was supreme during the booming 1990s. It had its roots in scholarly arguments that striving to satisfy multiple constituencies--employees, customers, the community--is a recipe for underperformance.
In these trying economic times, as the entertainment behemoths rejigger their game plans to promote content, not synergy, and try to adapt to the digital era, is playing up to Wall Street really the best way to go? (Some would argue that they don't have much choice.)
For example, Time Warner's recent big moves-- spinning off its cable system, slashing New Line Cinema and shuttering Warner Independent and Picturehouse---were made in part to appease pressure from large stockholders like Carl Icahn and Wall Street analysts. But were they the best moves for Time Warner in the long run? Richard Parsons, chairman of the Time Warner board, used to stand up to Wall Street in the interest of the longer-term needs of the company. And lost the CEO job for it.
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remember mackey's little problem with offering too much info in his blog. and check out his non-profit.
www.causealliancemarketing. a bit wacky?
Posted by: miyava | July 03, 2008 at 12:20 PM
Costco is another good example of a company where they do things right, treat the employees decently, don't worry about the next quarter, and have the stock continue to rise in the long haul.
Posted by: mitkid | July 03, 2008 at 03:08 PM
@miyava: I'm really not sure what that has got to do with this topic of "stakeholder value"...?
@AT: We are absolutely experiencing a time in the biz where studios, networks, producers and creatives should think long and hard about taking their focus away from stock price and looking more carefully at their treatment of customers and employees. One hopes that the current trends in social media, open source culture, and "user-gen" will speed the process up.
Posted by: sick of it all | July 04, 2008 at 04:55 PM
The shareholders own the company (where do those large market caps come from?) so the idea that the officers can just go out and do whatever they want without regard to shareholders is not, and never will be, realistic. This is what happens when private companies go to the public trough for money. If these people want to exercise as much control as they claim, their companies will need to stay private or go back to being private. This isn't theoretical; its just a summation of business and legal reality.
Posted by: Rodney | July 05, 2008 at 11:19 AM
I understand--but companies are often steered by powerful stockholders--whose motivation tends to be short-term greed-- and not the long-term best needs of the company.
Posted by: anne Thompson | July 05, 2008 at 02:55 PM
I think knowing that short-term measures guide decision making more often long-term goals is just part of the risk that companies engage in when they decide to subject themselves to the ebb and flow of public markets. I think this split between art and the market will become even more acute now that credit and private equity markets have dried up.
Posted by: Rodney | July 06, 2008 at 01:09 PM
God yes, how many times have we made fun of "old media" because of their inability to get it together, reinvest in infrastructure and catch up with consumers' desires to buy their products in new formats?
Posted by: Erin D. | July 09, 2008 at 03:27 PM