For the last 100 issues or so, it has been the explicit mission of
Financial Director to provide information, ideas, insight and lots of
other words beginning with ‘i’ to help our readers create shareholder value. (We
parenthetically changed that to ‘stakeholder’ value for the not-for profit
sector – but you get the idea.) And to be honest, that has been the
implicit mission of Financial Director going back much further
in time than that.
A few months after I had the good fortune to take up the editor’s chair, the
FTSE-100 index surged through the 6,000 mark, having soared 1,000 points in
barely eight months. (It gave me a feeling of déjà vu: I was a young
‘blue button’ on the floor of the London Stock Exchange the day in 1982 that the
old FT-30 index went through 600 for the first time – having taken ten years for
it to rise 100 points.)
Fast-forward to spring 2006: it was déjà vu all over again as the
FTSE-100 went through 6,000 – having taken about a year to rise 1,000 points. So
there we were: It had taken from 1998 to 2006 for the market to go from 6,000 to
6,000. And our self-proclaimed purpose throughout all that time had been to help
companies create shareholder value. Depressingly, it didn’t look as though much
value had been created. (Okay, there’d been a few dividends paid out in the mean
time, but we’d really have hoped for a more spectacular performance than that.)
And so we got to thinking: if there hasn’t been much value created in the
past eight years, are there any implications for British management? If managers
have just about kept up with the increasing complexity in the business world,
but failed to turn any of that into shareholder value growth, what then? Could
it really be true that, in that sense, companies are no better managed than they
used to be?
Samuel Johnson – he of dictionary fame – defined the word ‘essay’ as “A loose
sally of the mind; an irregular indigested piece; not a regular and orderly
composition.” That pretty much sums up the piece that you’ll find
In writing it I’ve had the benefit of having met countless industry experts and
finance directors over the years – indeed, that’s the greatest pleasure in this
job – but, of course, they are blameless for the result.
I hope you find it thought-provoking and, if so, do let me know your views.
The role of FDs in the value-creation process is indispensable. With IFRS and
other compliance issues out the way, I look forward to seeing how long it takes
FDs and their colleagues to propel the FTSE through 7,000.
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