The greatest confusion, however, comes into play around the notion of shareholder value. For public companies, it has a very specific meaning, since they are legally and morally obligated to strive to produce the best possible financial results for their shareholders. That’s the deal. If you take other people’s money, you’re supposed to give them what they want in exchange, and what buyers of publicly traded stocks want is a good return on their investments. The relationship seems so obvious, so logical that we generally assume all businesses must operate the same way. But that assumption ignores another equally obvious truth: What’s in the interest of shareholders depends on who the shareholders are.
The shareholders who owned the businesses I was looking at had other, nonfinancial priorities in addition to their financial objectives. Not that they didn’t want to earn a good return on their investment, but it wasn’t their only goal, or even necessarily their paramount goal.