From Total SHAREholder Returns (TSR) to Total STAKEholder Returns (TSR2)

The doctrine of maximising shareholder returns (MSR) has enjoyed a long and destructive reign in corporate governance. Once considered the most rational and scientific way to manage companies, it has since been recognised for what it is: a narrow, reductive ideology that distorts corporate behaviour and undermines long-term prosperity. Even Jack Welch, once lionised as the apostle of shareholder value, later recanted.

“On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… Your main constituencies are your employees, your customers and your products.” (Financial Times, 12 March 2009).

It is worth remembering that Welch’s target was shareholder value itself, not the more specific formulation of MSR. But the point is clear enough: when shareholder returns are treated as the purpose of the corporation rather than as the outcome of a healthy business, destructive behaviours inevitably follow.

Yet while MSR has been discredited in principle, it has survived in practice, under another name, total shareholder return (TSR), a metric popularised by McKinsey & Company. TSR, we are told, is simply a measure: the sum of dividends and share-price appreciation over a given period. Unlike MSR, it is not an ideology but a neutral tool. This sounds reassuring. But is the distinction real?