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February 22, 2006

A different type of stakeholder

Although I haven't followed his career closely Don Argus has always struck me as a deep and broad minded thinker. There are other powerful CEOs and chairmen that don't evoke the same confidence in their ability to think beyond profit and power. A certain telecommunications carrier comes to mind in that respect.

Don Argus came to my attention again this morning in this article [Subscription Required] in the Fin Review today. In this edited extract of a speech he gave yesterday to the Australian Institute of Company Directors Argus argues that the narrow focus on shareholder interest is misplaced. Certainly shareholders provide the financial capital for the company to operate, but many (most?) have no long term commitment to the company. However:

...should shareholders hold sway over strategy and operational implementation which may force management to drastically change the fortunes of a particular company. These same shareholders could be gone in the blink of an eye by selling their shares the next day or even the next minute.

Others with no skin in the game (at least financially speaking) may demonstrate much longer term commitment and interest (although as Argus points out in the case of French activist José Bové that interest may be negative). Employees come to my mind as a group that provide a certain type of capital without which the long term growth of the company would be impossible. To expect that we can gain the commitment we require from this group in return for salary and conditions is, in my mind, naive.

Regardless, Argus goes on to argue that boards need to take into account, and balance, the interests of a broad group of stakeholders. A fine balancing act not doubt, but one that reflects the realities of modern corporate life — telco CEO take note.

Posted by chriscurnow at February 22, 2006 11:01 AM

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