Quote:

---

With stocks near record highs and Wall Street smiling again, here's a counterintuitive idea about the value of those shares: Investors suffer when a company focuses too much on pleasing them.

By trying to boost their stock price in the short term, companies undercut their performance in the long term, says Lynn Stout, a Cornell Law School professor and author of "The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public." They spin off divisions, buy back shares, and cut costs at the expense of research and development. It's like fishing with dynamite, she says: It gets quick results but spoils the pond.

Take Kraft. The longtime corporate icon unexpectedly split itself into two, creating Kraft Foods and Mondelez last year, in a move applauded by hedge funds and others who'd been clamoring for higher share values. But the two companies have stumbled along since with little change in their stock prices. They reported poor earnings in February.

the face of a volatile stock market and lackluster returns over the past 15 years, socially responsible investors say companies need to temper concern about shareholder value with attention to the environment as well as their workforce and community. In theory, this so-called triple-bottom-line approach should minimize the risks of unforeseen labor or environmental problems and boost profitability. The challenge is that in practice it's very hard for management to keep a long-term perspective – and the results don't always show up in share prices.

"It's difficult because the long term is long, and it can be very hard to keep your hands off [potential] short-term profits," says Steven Lydenberg of Domini Social Investments in Boston.

It's also hard for investors to take the long-term view. Some may worry companies are too willing to sell the geese that laid their golden eggs in a bid to grow market capitalization. But they also don't want to be left behind every time others harvest short-term profits. An LPL Financial analysis found that the average holding period of a stock has fallen from eight years in the 1960s to around five days in 2012. Much more at http://www.csmonitor.com/Business/new-economy/2013/0316/Do-companies-g
o-too-far-to-please-their-shareholders?nav=87-frontpage-entryBloglist

---