Focusing on shareholder value reduces shareholder value

This factoid just in, from Roger Martin’s book “Fixing the Game”:  Return to shareholders was better before the shareholder value movement took root in the 1980s.  CEOs have now become managers of expectation rather than managers of the business.

I am sure this is an arguable point, but have certainly experienced many times the corporate dysfunction of taking radical actions to meet the numbers for a quarter.  In my own estimates, the loss of wealth creation due to this sort of stupidity is easily 10 to 1. So the factoid seems very plausible to me.

Just to take a simple case, a long-standing workshop is postponed to the next quarter at the last minute as part of a blanket order to reduce travel costs to meet expense guidance before the quarter closes.  The direct travel costs in this case actually go up as tickets are forfeited (or worse if they are refunded because that means companies are routinely overpaying 2-3x for the tickets).  Days of preparation go to waste.  Most importantly, the work of the meeting does not get done.  In some cases I’ve seen delaying the launch of a product.

What does your experience support?  Is the focus on setting quarterly  guidance and then taking actions to meet expectations create a healthy discipline and transparency; or does it create massive dysfunction and manipulation?