Porsche Changes Tack
Porsche Changes Tack
Yes, of course, we have heard of shareholder value. But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders. Dr. Wendelin Wiedeking, CEO, Porsche, Die Zeit, April 17, 2005.
Porsche had always been different. Statements by Porsche leadership, like the one above, always made Veselina (Vesi) Dinova nervous about the company’s attitude about creating shareholder value. The company was a paradox. Porsche’s attitudes and activities were like that of a family-owned firm, but it had succeeded in creating substantial shareholder value for more than a decade. Porsche’s CEO, Dr. Wendelin Wiedeking, had been credited with clarity of purpose and sureness of execution. As one colleague described him: “He grew up PSD: poor, smart, and driven.” Porsche’s management of two minds had created confusion in the marketplace as to which value proposition Porsche presented. Was Porsche continuing to develop an organizational focus on shareholder value, or was it returning to its more traditional German roots of stakeholder capitalism? Simply put, was Porsche’s leadership building value for all shareholders, including the controlling families, or was it pursuing family objectives at the expense of the shareholder? Vesi had to make a recommendation to her investment committee tomorrow, and the evidence was confusing at best.
Shareholder Wealth or Stakeholder Capitalism?
Vesi’s dilemma was whether Porsche—Porsche’s leadership—was increasingly pursuing shareholder wealth maximization or the more traditional Continental European model of stakeholder capitalism. Shareholder Wealth Maximization. The Anglo-American markets—the United States and United Kingdom primarily—have followed the philosophy that a firm’s objective should be shareholder wealth maximization. More specifically, the firm should strive to maximize the return to shareholders, as measured by the sum of capital
Yes, of course, we have heard of shareholder value. But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders. Dr. Wendelin Wiedeking, CEO, Porsche, Die Zeit, April 17, 2005.
Porsche had always been different. Statements by Porsche leadership, like the one above, always made Veselina (Vesi) Dinova nervous about the company’s attitude about creating shareholder value. The company was a paradox. Porsche’s attitudes and activities were like that of a family-owned firm, but it had succeeded in creating substantial shareholder value for more than a decade. Porsche’s CEO, Dr. Wendelin Wiedeking, had been credited with clarity of purpose and sureness of execution. As one colleague described him: “He grew up PSD: poor, smart, and driven.” Porsche’s management of two minds had created confusion in the marketplace as to which value proposition Porsche presented. Was Porsche continuing to develop an organizational focus on shareholder value, or was it returning to its more traditional German roots of stakeholder capitalism? Simply put, was Porsche’s leadership building value for all shareholders, including the controlling families, or was it pursuing family objectives at the expense of the shareholder? Vesi had to make a recommendation to her investment committee tomorrow, and the evidence was confusing at best.
Shareholder Wealth or Stakeholder Capitalism?
Vesi’s dilemma was whether Porsche—Porsche’s leadership—was increasingly pursuing shareholder wealth maximization or the more traditional Continental European model of stakeholder capitalism. Shareholder Wealth Maximization. The Anglo-American markets—the United States and United Kingdom primarily—have followed the philosophy that a firm’s objective should be shareholder wealth maximization. More specifically, the firm should strive to maximize the return to shareholders, as measured by the sum of capital