Shareholder Value Is Not Wealth Creation
New York Stock Exchange
(Photo by Perpetual Tourist) (CC BY) (Resized/Cropped)
While shareholder value is certainly important and a concern, it is not wealth creation; it is capital direction or distribution. Also, capital distribution, the free choices of movement, exchange, and transactions, is significantly different than re-distribution.
Distribution is moral and free; free exchanges between parties and individuals, while re-distribution is most often immoral and oppressive since it typically takes place as a result of powerful entities, usually government, forcing, through theft (although frequently legal theft through taxation laws) or coercion, the movement of capital and wealth to other parties who, otherwise, would not have received it through free-market exchanges and transactions.
While focusing on customer satisfaction is a generator of wealth creation; this is, more, bigger, and better pies, using the pie analogy of economics (see Pies for Everyone). The means of satisfying the customer is productivity of a product or service which creates value for the customer.
Productivity will result in wealth distribution, as opposed to wealth re-distribution, based on Natural Law which supports the willing and free exchange of goods and services between individuals and parties. The drive to satisfy a customer through productivity and free exchange results in the most prosperity of the vast majority of the population. Customer satisfaction, productivity, and free exchange will drive and result in a society’s most advanced and accelerated means of providing, using the pie analogy again, the biggest, best, and most pies for all in society to partake in.
This phenomenon is an extension of Natural Law.[1] Overall, “under capitalism, material success depends on the appreciation of a man’s achievements on the part of the sovereign consumers.”[2]
[1] The ideas of this paragraph arose from comments during the Keynote of Masaaki Imai during his Keynote presentation at the 2013 TWI Summit in Savannah, Georgia. Masaaki Imai, May 14, 2013, “TWI as the Starting Point of Kaizen-Lean-Green,” TWI Summit, (Savannah, GA: Hyatt Regency Savannah), Slide 2.
[2] Ludwig von Mises, 2008 (originally published originally in 1956), The Anti-Capitalistic Mentality, (Auburn, AL: Ludwig von Mises Institute), p. 31.
Originally published on Townhall Finance.
Jim Huntzinger began his career as a manufacturing engineer with Aisin Seiki (a Toyota Group company and manufacturer of automotive components) when they transplanted to North America to support Toyota. Over his career he has also researched at length the evolution of manufacturing in the United States with an emphasis on lean’s influence and development. In addition to his research on TWI, he has extensively researched the history of Ford’s Highland Park plant and its direct tie to Toyota’s business model and methods of operation.
Huntzinger is the President and Founder of Lean Frontiers and a graduate from Purdue University with a B.S. in Mechanical Engineering Technology and received a M.S. in Engineering Management from the Milwaukee School of Engineering. He authored the book, Lean Cost Management: Accounting for Lean by Establishing Flow, was a contributing author to Lean Accounting: Best Practices for Sustainable Integration.
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