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Indeed. I've updated the diary to read
(2) Running a corporation in the interests of its shareholders, commonly described as "maximising shareholder value", and this is generally taken to mean (at least to a good approximation) maximising the value of the shares.
(6) For a corporation to serve the financial interests of shareholders holding well-diversified portfolios, "maximising shareholder value" entails maximising the (suitably weighted) share values of the corporations in their portfolios. (This isn't exactly correct, since investors value not just the "share value", but its effect on portfolio-level risk, etc., but it is a good approximation and can serve as shorthand.)

Regarding the origin of this interpretation of "shareholder value", I don't know, but the definitions in Wikipedia: Shareholder value suggest that it is widespread. Isn't it a good approximation for typical investors, provided that the price reflects the actual value of the company, rather than a confused or fraudulent valuation? (That is, absent the considerations I discuss.)

Note that my purpose is not to praise stock-value = stockholder-value, but to bury or at least dirty it.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Sat Dec 23rd, 2006 at 07:16:55 PM EST
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PN: the value of the shares is the value at a particular point in time. What people are interested in is the return rate, that is, the value of the shares with reference to at least two time points: when the shares were bought and now. So if "Shareholder value = share value" is to make any sense, "share value = share return".

The "best" way to increase the return rate of a company is a speculative bubble around it. As long as the investor gets off the bubble before it pops, he can get fantastic returns, and the returns are the larger the closer to the popping one gets. Sort of like playing blackjack with the timing of the bubble ;-)

Those whom the Gods wish to destroy They first make mad. -- Euripides

by Carrie (migeru at eurotrib dot com) on Sun Dec 24th, 2006 at 04:43:07 AM EST
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