Hmmm, Telstra has decided not to proceed with its FTTN rollout.
Interesting use of the Shareholder Value concept. SpiralPath understands that Shareholder Value is supposed to be a solution to the agency question. That is the “principal” (ie owner) wants to do something (ie run a business). The principal doesn’t have all the resources to do this so they employ an agent (manager).
Managers, as we all know, are lazy and want to be paid as much as possible for doing as little as possible. So the principal has to add incentives to make the manager work harder and, in particular, to do what the principal wants the manager to do.
Lovely theory. All the problems of agency solved – except the costs. So we bring in shareholder value. We simplify the whole thing. We pay executives huge salaries with added stock bonuses if they can do one thing – increase the share price. Even the most dumb witted managers should be able to understand this.
Except in cases like Telstra. The managers become so engaged in the task of increasing shareholder value they forget that shareholder value is simply a measure of how well they are serving the interests of shareholders. So single mindedly focussed in fact that they will refuse to do what shareholders (in this case, the Australian Government) want because it will reduce the share price.
Twisted logic indeed.
