I’m seeing a lot of companies that had tremendous growth over the past 3 years and at the first sign of “unmet targets” they take drastic measures (I.e. letting go of workforce). While their investors might indeed lose their confidence, sell their shares and, therefore, decrease the overall firm value, companies have made and still have lot of money in the bank, why do they need to care about growth, share price and what investors think to such extreme extents? Wouldn’t it be ok to just go with “we did not grow a single point this year and we have made the exact same profits of last year, that’s really good!”
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The companies are OWNED by their shareholders. Ultimately, the shareholders, operating through the Board of Directors, are the people who control the company. The executives who decide that they don’t care what’s good for the investors will rapidly find themselves out of a job.
And, some companies really aren’t growth companies — they spin off a steady dividend to their shareholders. If that’s what their shareholders want, then the shareholders may keep the company from trying to grow. Why? Because growth involves taking risks, and those shareholders might not want those risks.
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