JOHANNESBURG - Jack Welch, the former chairman and CEO of General Electric (GE) increased the value of the company by over 4000% during his time at the helm of GE between 1981 and 2001.
At the time, one of Welch’s most prolific focuses was to maximise total shareholder return. This seeks to maximise the benefit received by shareholders which drives up demand for the shares and hence increases the value of the shares. Through executing this strategy, Welch was named by Fortune Magazine as the “Manager of the Century” in 1999.
Fast forward 10 years and in 2009 Welch was quoted as saying that “shareholder value is the dumbest idea in the world”. This may seem counter intuitive given the strategy he pursued when leading GE, however Welch did have his reasons. After saying that, Welch added that “Shareholder value is a result, not a strategy. Your main constituencies are your employees, your customers and your products.” (Financial Times).
In the mid-1990s the idea of pursuing the Triple Bottom Line in business began to gain traction.
The Triple Bottom Line (TBL) means Profit, People and Planet or Economic, Social and Environment. This framework was designed so that a larger group of stakeholders are included rather than the limited stakeholders using traditional financial metrics - which formed the focus of the business. By considering each of the TBL stakeholders with equal attention, businesses are geared towards sustainability from a much broader perspective than simply economic. The importance of an organisations’ employees as well as their environmental impact has been viewed with increasing importance in recent years and has placed even further emphasis on the concept of targeting the triple bottom line.