Promoting Long-Term Shareholder Value by “Competing” for Essential Stakeholders: A New, Multisided Market Logic for Top Managers

Abstract

The single-minded pursuit ofa short-term shareholder value maximization “mantra” by top managers often results in long-term value destruction for shareholders. We explain this paradox and develop an alternate, market-based approach labeled “competing for essential stakeholders” (CES). CES provides levers that promote long-term value crea- tion for shareholders and for other essential firm stakeholders. Top managers using CES act as “operators” of the firm as a multisided marketplace. Increases in value creation for members on one side of the market make membership more attractive to those occu- pying the other sides, and vice versa. The result is increased value creation for all essen- tial stakeholder groups.We discuss benefits ofand barriers to CES.