Conclusions

This chapter has raised questions not only about the validity, but also about the long-run efficacy of single-minded attention to shareholder value. While in theory such attention should lead to a proper consideration of other elements of purpose and accelerate shareholder value creation, in practice it is obvious that its application is often too narrow: Today's leadership often ignores the backlash of underestimation of other important elements of stakeholder purpose and/or the positive multiplier effect that proper attention to these factors could have.

We have concluded that in all businesses, long-term success requires attention to this balance, but in some businesses it is much more difficult to achieve than in others. In businesses that are naturally noble and profitable, water is already flowing in the right direction and leadership simply has to steer the ship into the stream. In other businesses, it is a continual struggle against the stream to correct natural imbalances. Most businesses fall somewhere between these two extremes.

Left to the market, as many believe it should be, there is a risk that relative stakeholder power tips the balance in one direction or another and self-interest wins out over long-term business health. It is here that leadership has to enter the picture. Leadership's role is a central one in determining whether a business, and possibly a whole industry, spirals downward in a vicious circle in which few, if any, stakeholder purposes can be satisfied, or whether virtuous circles can be created where the purposes espoused by each key stakeholder can be achieved together.

Corporate citizenship, as it is often currently defined, does not deal effectively with the problems of imbalance. Only statesmanlike leadership can do this. Although solid evidence is still skimpy, there are enough examples on the table to piece together at least a partial picture of what leaders can do to achieve balance and what such leadership might look like.

What is evident is the need for leadership initiative at the policy, strategic, and operational levels simultaneously, and attention to not only the “whats” and “hows” of balanced leadership, but even more importantly to the “whys.” When any of these are ignored or only partially attended to, focusing on shareholder value improvement up front is like pushing on a string; when these are all used in a coordinated fashion, the resulting broad commitment has the combined effect of tautening the string and pulling shareholder value upward. The combination of satisfied customers, motivated employees, passionate leadership, societal progress, and returns that properly compensate shareholders for risk is an explosive mixture for value creation. Putting shareholder value creation too much in the forefront is, by contrast, to put the cart before the horse. As we move into the 21st century, leaders who ignore these truths do so at their own risk.