Summary of The World’s Dumbest Idea

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Rating

8 Overall

8 Importance

7 Innovation

9 Style


Recommendation

Since the 1990s, maximizing shareholder value has been a major mission of company executives in the United States and abroad. However, investment specialist James Montier says that upholding this ideal is little more than a smokescreen for propping up executive compensation. In fact, Montier claims that stock buybacks and other actions designed to enhance shareholder value produce tangible benefits only for those with substantial equity-based rewards. getAbstract recommends his witty, engaging and research-based “tirade” on shareholder value to executives, board directors and others responsible for assuring good corporate governance.

In this summary, you will learn

  • How shareholder value maximization (SVM) has grown in popularity;
  • How SVM has affected corporate returns, the economy and income inequality; and
  • Why company executives, through their equity compensation arrangements, may be the only beneficiaries of SVM.
 

About the Author

The author of several books, James Montier is currently part of GMO’s asset allocation team.

 

Summary

Until recent times, goals such as customer satisfaction and employee respect dominated company mission statements. But today, firms prioritize shareholder value maximization (SVM). When IBM did so in the 1990s, its total returns rose, seemingly validating SVM. But Johnson & Johnson’s returns climbed...

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