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The World’s Dumbest Idea
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The World’s Dumbest Idea

James Montier
GMO, 2014
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Editorial Rating

8

Qualities

  • Hot Topic
  • Engaging

Recommendation

Since the 1990s, maximizing shareholder value has been a major mission of company executives in the United States and abroad. However, investment specialist James Montier says that upholding this ideal is little more than a smokescreen for propping up executive compensation. In fact, Montier claims that stock buybacks and other actions designed to enhance shareholder value produce tangible benefits only for those with substantial equity-based rewards. getAbstract recommends his witty, engaging and research-based “tirade” on shareholder value to executives, board directors and others responsible for assuring good corporate governance.

Take-Aways

  • From the 1990s, companies have focused on shareholder value maximization (SVM) more than on clients, employees and communities.
  • Since SVM became a top priority, firms’ total adjusted real returns have underperformed 1940–1990 returns.
  • The onset of the SVM era coincides with falling rates of business investment, growing income inequality and a decrease in labor’s share of GDP.

About the Author

The author of several books, James Montier is currently part of GMO’s asset allocation team.

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