Value has to be the overriding objective for business leaders. Of course, a business must act ethically, and within the bounds of the law and regulations, but within these constraints the objective is to grow future cash flow and intrinsic value aggressively.
In doing this, the interests of all other stakeholders, employees, debt holders, customers and others, are also maximized. Only an economically strong business model can afford to give employees the best conditions in the industry, if that is part of their employment proposition, or give customers the best value trade-offs. As soon as business leaders tamper with this prioritization, a whole field of unknowns is unleashed in decision-making. The business subsequently gets weaker and its ability to give all stakeholders the maximum in value diminishes. Ultimately, the business fails economically, and it brings all stakeholders down with it.
The value maximizing business will seek to get the most out of its employees – and in the employee markets it needs to deliver a sustainable attractive proposition in return. The same applies to customers. Even the environment and sustainability will receive the maximum from the company that prioritizes the creation of value.
Now, if the current configuration of the market and the competition in it is delivering outcomes that are not acceptable to society – such as pollution, or customer service levels, or even pay – than it is up to society to put conditions on the market as a whole in the form of new regulations. Managers must be free to focus on their own mandate of maximizing value. With that said, in many circumstances the business that voluntarily heightens standards often improves brand positioning and adds to business value.
|