Should stockholders choose strategy?

The experience of the Regional Bell Operating Companies (RBOC) suggests that turning strategy decisions over to stockholders serves neither the interests of managers nor the interests of stockholders themselves. A recent study of the impact of stockholder diversification and acquisition decisions fo...

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Bibliographic Details
Published inPublic utilities fortnightly (1994) Vol. 131; no. 7; p. 16
Main Authors Blase, William, Seitz, Neil
Format Magazine Article
LanguageEnglish
Published Washington Public Utilities Reports, Incorporated 01.04.1993
Subjects
Core competencies
Decision making
Diversification
Divestiture
Effectiveness
Institutional investments
Statistical data
Stock prices
Stockholders
Strategic planning
Studies
Telephone companies
United States > US
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Summary:The experience of the Regional Bell Operating Companies (RBOC) suggests that turning strategy decisions over to stockholders serves neither the interests of managers nor the interests of stockholders themselves. A recent study of the impact of stockholder diversification and acquisition decisions found that managers guided by short-term stockholder consensus would have generated below-par value by abandoning their areas of core competency. Relying on stockholders is fraught with risks. Stock changes hands frequently, so the stockholders when a strategy fails may be different from those who concurred when the strategy was selected. Furthermore, stockholders want value and ultimately will judge managers based on whether they created long-term value. Past approval by former stockholders is a poor substitute for value. Stockholders can and should be consulted when it comes to things they are likely to know and care about the most, such as the dividend payout policy, but when choosing a strategy, managers are in a better position than stockholders to make decisions.
ISSN:1078-5892
1945-2578