Insured Property Owner Guides

The False Promise behind “Shareholder Value Maximization” and, The “Nick Shirley” Effect

Recently, in an effort to help educate and protect the interests of millions of unknowing global institutional and individual shareholders and investors in both P&C insurance companies and building product distribution companies, I have been sharing with them the truth about how far too many of them have been falsely led to believe that investing hundreds of millions to billions of dollars with any company or organization (public or private) according to the failed and nonviable investment concept known as "shareholder value maximization", would help them to achieve maximum ROI.

In regards to that failed concept, former GE CEO Jack Welch once called it, "The dumbest idea in the world". In an article in the Harvard Business Review written by distinguished Harvard Business School professors Joseph L. Bower and Lynn S. Paine, they wrote that the concept is; "flawed in its assumptions, confused as a matter of law, and damaging in practice.” They also described the concept as "pernicious nonsense".

With the above in mind, after several months of pointing out to the leadership from all of the top both publicly and privately held roofing and related building product distribution companies in particular – who have not, over the years, done much of anything to truly support their contractor customers in any meaningful way, the tremendous financial (as well as potential legal defense) costs of continuing to follow that failed SVM concept or any variation thereof, some of them have begun to respond. The most recent example came in an email message sent to me several weeks ago.

The email message: While I won't be revealing the name of the sender nor the name of the individual the sender referenced as "he", several weeks ago, I received an email message from the leader of one of the top five multi-billion dollar valued building product distribution companies on the planet in reference to the leader of another one of the top five multi-billion dollar valued building products distribution companies on the planet who I believe was a big promoter of the SVM concept. The email message from the sender read as follows; "Check that stock out, he has lost his investor’s billions so far."

In 2007, I personally made it abundantly clear to Allstate Insurance Company President and CEO Tom Wilson who was/is also a fan of SVM, that, in his position as President and CEO, while I agreed that Allstate did have an "obligation" to earn a return for the company's shareholders, achieving that goal by repeatedly underpaying Allstate policyholders by hundreds of millions to billions of dollars on their legitimate property damage claims was, at the very least, terribly misguided and, at the most, potentially criminal. I also suggested to him that he had learned nothing from the failures of Enron, WorldCom, and Adelphia, among others, and the life changing examples of the executives in charge of those companies who were responsible for the corruption – who put their own and their shareholders and investors financial interests ahead of their customers and, as a result, were later forced to pay a tremendous price for having done so.

While Wilson did quickly respond to my letter by immediately ordering his claims department to fully pay the substantial and illegally withheld outstanding balance then still owed to one of my insured property owner customers, in the present, it is clear that neither he nor his other company leaders had learned their lesson or heeded my warnings. Recently however, due to the efforts of the American Policyholder Association (APA) and other interested consumer advocacy groups, they, State Farm, and all of the other P&C insurance companies are learning that there are severe penalties for corporate leaders who, among other questionable actions, cause tremendous financial and other harm to policyholders by putting their own and their shareholders and investors returns ahead of the interests of and the cost to, the people who pay close to a trillion dollars every year for their far too often, unreliable insurance products. I predict that many prosecutions will soon be coming...

Do the research through: “The deception behind shareholder value maximization”

The “Nick Shirley” Effect – Lessons now being “leared” by many who once believed that no one was smart enough to figure out what they’ve been up to...

Regardless of whoever committed the fraud of whatever kind, what once took years and decades to expose is now being exposed at a record pace.

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Larry Burtis

Founder/President/CEO at 3RSystems, LLC and ICCOA

American Policyholder Association (APA) - Regulatory Compliance Administrator