Prof. Michael Jensen's higly-cited 1976 paper [0] identified the principal-agent problem [1] then argued that a company's sole purpose is to maximize shareholde

Prof. Michael Jensen's higly-cited 1976 paper [0] identified the principal-agent problem [1] then argued that a company's sole purpose is to maximize shareholder value. This thinking is what gradually led to the now widespread obsession with stock prices and short-term results. Short-termism is harmful. Jack Welch said it best in a Financial Times [1] interview: “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal. … Short-term profits should be allied with an increase in the long-term value of a company.” [0] Theory of the firm: Managerial behavior, agency costs and ownership structure, http://www.sciencedirect.com/science/article/pii/0304405X7690026X http://www.sciencedirect.com/science/article/pii/0304405X769... [1] https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble... [2] http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-ba10-0000779fd2ac.html#axzz1eiLpL2PZ http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-ba10-00007...