By JOE NOCERA
Published: August 10, 2012
I’ve been known to say that I was present at the creation of “shareholder value.”
It’s an exaggeration, of course. But in 1982 — literally half a lifetime ago for me — I wrote an article about the first big takeover attempt by T. Boone Pickens. One of his central justifications for the takeover movement that he helped spawn was that company managements didn’t care enough about the company’s owners, a k a the shareholders. Their cash-based compensation wasn’t properly aligned with the desires of shareholders. Shareholders, he believed, need to assert their primacy — and force executives to start paying attention to the price of their companies’ stock. I later learned that Pickens was not the first person to make this argument — academics had already created the theory that undergirds it. But, at the time, it was still a pretty radical view.
The rise of the theory of shareholder value has been good for shareholders. On August 12, 1982, thirty years ago tomorrow, the Dow Jones Average stood at 776. On August 12, 2012, it stands at 13,208.
Most of the attention in public discussions of the increase in profitability of big corporations over those 30 years has been about cut-cutting, and rightly so. Yet, very little attention has been paid to the possibility of collusion, which therefore interests m