Your sentence brings up this interesting discrepancy between what something might mean, and what it actually means.
"Increasing shareholder value" could conceivably mean long term growth and doing everything right for a win-win-win situation. It makes sense, in a way.
But really it's much more nihilistic than that. There could be one majority shareholder that smashes the company and fucks over minority stake holders, causes a bad outcome for everyone except him/herself, and finds a legal way to execute the plan. That is a real thing that happens, and can be done as legally and with as much validity as treating everyone well to encourage long term growth.
The shareholders own the company, and it's theirs to do what they want with, even if that means picking up their toys and going home.
More important is the average tenure of the shareholder. Much wealth now resides in organizations that do not play a traditional ownership role. Mutual funds need to rebalance, typically every month or every quarter. Pension funds and hedge funds are actively traded. Average share holding is now less than 2 years. Doing whats best for the shareholder means gutting the company and maximizing profits for the next 2 years. This is why the well run companies tend to be those where the founding family still holds a large block of shares -- they tend to think long term. And this would include IBM during its Golden Age.
My God. I didn't know that. No wonder corporations must focus on profit if shareholders keep flowing in and out, and each one treats their companies as abstract money-generating entities.
I mean, we can call this "not playing a traditional ownership role" but I can't shake the feeling there's something deeply wrong with that. We're buildings piles of layers of abstraction and the most important people are the ones who are most separated from you, don't know or care about you at all, and yet they "own" you and can tell you what to do. How on Earth one is supposed to run a company like that? Also, didn't similar abstraction cause the housing market collapse in 2008?
> This is why the well run companies tend to be those where the founding family still holds a large block of shares -- they tend to think long term.
Yes, I've observed that too. That's why I tend to believe, say, Google when they talk about pro-bono plans much more than any other IT corp. That's why I believe Musk can and will pull off things he says while his competitors will lag behind - because he both has a vision and holds SpaceX in iron grip. He doesn't have to follow the market if he choses not to.
Layoffs are not generally considered good the stock - plenty of stocks have gone up plenty of times without layoffs.
However, it is usually the case that management only does layoffs when really necessary, and in that case the stock should respond positively to much needed reform.
