Criticism on Value Based Management
Some criticize the principles of value-based management, arguing it fails to take into account other constituencies than stakeholders
(locals, customers, employees, environment etc). But in order to create value for shareholders, there should also be a good reputation in 3 areas:
1. The quality of goods and services.
2. Capability to find talented people, hire them and keep them as employees.
3. The community/environment.
Indeed, evidence exist that value for shareholders could exist only if there is value for other constituencies as well
. For example, once customers are not pleased, they will buy from competitors. Or, if employees are unsatisfied, they will leave and change their job.
Source: S. D. Young and S. F. O'Byrne, EVA and Value-Based Management: A Practical Guide to Implementation