Who Gets The Rewards? Promote Value Creation By Rewarding The Right Stakeholders
Too often, we boost short-term earnings, rather than distribute rewards to those whose support is critical for long-term value creation. The fear of disappointing investors and analysts is so strong that many executives would give up economic value in exchange for current earnings. They believe that the best way of increasing the value of the firm is to maximize earnings in a predictable way on behalf of the shareholders. When short-term earnings are threatened, this may mean cutting back on discretionary spending by distributing as much as possible to shareholders and as little as possible to other stakeholder groups whose support is key for future growth.