This fails elementary logic. Look at the propositions: 1. Businesses make their money by keeping the customers happy. 2. The stockholders are the customers.
So the conclusion must be: 3. Businesses make their money by keeping the stockholders happy.
This is, however, nonsense. The stockholders bought the stock long ago, when the company first went public. There is *no* money to be made by keeping the stockholders happy..even if the stockholders buy more stock, they will buy it from other stockholders, not from the company itself. The company has already sold all of its stock.
In reality, the stockholders are the owners of the company and want to make money. They will make money if they keep the customers happy. If the customers aren't happy, neither the shareholders nor the employees will be happy.
So there's no way around keeping the customers happy.
QED.
Not quite.
See, while the company doesn't make money per se on having its share price go up, it does get some fairly fabulous results out of its book value (this is way more important for banks than for most companies except when the company is close to breaching a debt covenant). But more important than that is the simple fact that most higher ups on the management teams of most companies tend to get reimbursed with stocks or stock options.
So they have a vested interest in seeing share prices go up which is why, for the past half decade or so, 1/3rd of earnings per share growth were from corporate stock buy backs*.
If the company makes money, it spends a large chunk of that money buying back equity, which leads to growth in share price which means that equity stakeholders can sell for a profit.
However, if equity holders are mad, they can do all sorts of things. Like, for instance, demand a change in management, swap out board members, vote against acquisition decisions or even reject a payroll plan for the management team (not common, has happened).
So, you're right on the broad framework that the opinion of customers is valuable, and that equity stakeholders don't often provide the profit of the firm (cough IPOs cough). But you're tots wrong on the relationship between shareholders and corporations, so I figured I'd clean that up.
*Also because dividends are taxed unfavorably relative to capital gains, be sure to phone your Congressperson about that as dividend payments are far more conducive to long termism, shareholder activism and good corporate governance than the short termist world of rapid turnover we have today. After all, if you only make a buck by sticking with it over the long haul, you tend to be more interested in the company making good long term decisions!
..good one
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