29 March 2006
CEOs and Stakeholders
I'm a stakeholder in Procter & Gamble. Not only do I use its products; my index fund is affected by the performance of P&G, a major stock in the markets it tracks. Moreover, my parents own P&G stock, so by extension I am also a shareholder.
CEOs today are well-paid because they can affect their company's market-value in many ways beyond maximizing operating or financing revenues. In fact, in the case of the largest public companies, public relations--"constructive engagement" in the words of P&G's chief executive--may be their main job.
Although CEOs must report formally to their Boards and through them to their companies' owners, they are indeed accountable to all those on whom the well-being of their companies depends. The value of a company's shares is ultimately determined by how much they appeal to those who would become their new holders.
I'm a stakeholder in Procter & Gamble. Not only do I use its products; my index fund is affected by the performance of P&G, a major stock in the markets it tracks. Moreover, my parents own P&G stock, so by extension I am also a shareholder.
CEOs today are well-paid because they can affect their company's market-value in many ways beyond maximizing operating or financing revenues. In fact, in the case of the largest public companies, public relations--"constructive engagement" in the words of P&G's chief executive--may be their main job.
Although CEOs must report formally to their Boards and through them to their companies' owners, they are indeed accountable to all those on whom the well-being of their companies depends. The value of a company's shares is ultimately determined by how much they appeal to those who would become their new holders.
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