Since, as my previously discussed research demonstrates, shareholder objectives vary within the same company, and between companies within the same industry, an industry-based generic ratio will disadvantage those corporations who, based on their own shareholder objectives, do not pursue that ratio as their principal outcome, or who rank that ratio in importance below other outcomes.

The preferred and more effective method for assessing CEO and corporate performance is by assessing their ability to deliver those outcomes that are specific to it, its shareholders and its context. It is considerably easier to assess a company against its own specific performance objectives, even though it might then be more difficult to establish cross-corporation relativities and comparisons.

In a competitive environment, it is easy to state that company 'A' is superior to company 'B' based on sales, market share, number of customers, etc. Biggest, highest or most, normally wins. However, when one factors in shareholder objectives, or what the company is trying to achieve within known constraints, then comparisons become more tenuous. Is a company that deliberately pursues and excels in dividend generation superior to a company that deliberately seeks long-term positioning? Is a company which pursues dividend maximisation with a gearing constraint of 25% superior to a company that pursues dividend maximisation with a gearing constraint of 75%?

Based on the model proposed, cross-corporation comparisons are only valid when the corporations involved in the comparison are trying to achieve the same outcomes based on the same constraints.

Pressure by institutions, analysts or an unsophisticated Board for a CEO to lead his organisation to a “best in sector” based on industry ratios risks focusing the organisation on outcomes that are not related to its shareholder requirements.