We Need To Stop Maximizing Profit And Start Maximizing Value

We Need To Stop Maximizing Profit And Start Maximizing Value Read more: http://www.businessinsider.com/lets-stop-maximizing-profit-and-start-maximizing-value-2012-12#ixzz2EaCccv3g

Since the late 1970s, when American companies were fat and complacent, the focus of American business has been on the bottom line.

Spurred on by activist shareholders, private-equity firms, and bonuses based on stock prices, corporate managers have become obsessed with maximizing quarterly profits.

This new focus has produced remarkable results.

Corporate Profit Margins

Business Insider, St. Louis Fed

Corporate profits have hit an all-time high as a percent of the economy.

Over the past three decades, big American companies have gone from having below-average profit margins to the highest profit margins in history (see chart at right).

Unfortunately, this obsession with profit maximization has come at a cost.

By focusing their entire effort on the bottom line, many American companies have reduced their value to the other constituencies that truly great companies serve, namely customers, employees, and society.

Read more: http://www.businessinsider.com/lets-stop-maximizing-profit-and-start-maximizing-value-2012-12#ixzz2EaCccv3g

This entry was published on December 9, 2012 at 7:04 pm. It’s filed under Politics and tagged . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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