>If the point of a business is compensating its employees, that might be a strategy. However, that isn't the point of the business. The point of the business is to generate money for the shareholders.
The Bank of England's chief economist has expressed concern that shareholder power is leading to slower growth.
Andy Haldane told BBC Newsnight that business investment had been lower than was "desirable" for years.
One reason was that a high proportion of corporate profits were being paid out to shareholders rather than reinvested in the company.
He said that in 1970, £10 out of each £100 of profits were typically paid to shareholders through dividends.
Today, however, that figure was between £60 and £70. Mr Haldane argued that left far less cash available for growth-boosting investment and that firms risked "eating themselves".
Corporate short-termism - a focus on immediate gains rather than long-term prospects - was a rising problem for companies and pre-dated the financial crisis, he said.
Interestingly the Bank of England's Chief Economist has today attacked that principle of company law: http://www.bbc.co.uk/news/business-33660426
To quote from the article:
The Bank of England's chief economist has expressed concern that shareholder power is leading to slower growth.
Andy Haldane told BBC Newsnight that business investment had been lower than was "desirable" for years.
One reason was that a high proportion of corporate profits were being paid out to shareholders rather than reinvested in the company.
He said that in 1970, £10 out of each £100 of profits were typically paid to shareholders through dividends.
Today, however, that figure was between £60 and £70. Mr Haldane argued that left far less cash available for growth-boosting investment and that firms risked "eating themselves".
Corporate short-termism - a focus on immediate gains rather than long-term prospects - was a rising problem for companies and pre-dated the financial crisis, he said.