In its current issue, Fortune magazine lists 7 new rules of business — and trashes no less than Jack Welch himself in the process. Perhaps the most respected manager of the last generation (he led GE from 1981 to 2001), Welch focused on increasing shareholder value. And he did a terrific job — GE’s market value went from $14 billion to around $400 billion during his tenure.

But now, says Fortune, savvy executives are getting ahead by focusing on customers, not shareholders. Why? Because, according to a study by Bain and Company, the average company loses more than half its customers every four years. The culprit, according to Fortune: Investor driven management, i.e., focusing on shareholders. “CEOs began managing the company by earnings per share instead of focusing on details like new products, service calls, customer-satisfaction scores – all those things that are supposed to produce the earnings per share.”

One CEO described the pressures this way: “Businesses became disconnected from their fundamentals, producing ‘perceived value’ instead of real value, because that’s what the stock market rewards.”

Fortune gave Welch a chance to respond, and though you can’t help but respect the guy for all he’s accomplished, he does come off sounding a bit out of touch. “When has there ever been a divergence between [focusing on] shareholders and customers,” says Welch? “No one is out saying, ‘Let’s screw this customer today, and if we do, our share price might go up 20 cents.’ They’re just not doing it.”

Actually, they are. They just don’t realize it. Bain found that 80% of executives think they are doing an excellent job of serving customers. But only 8% of customers agree!

Trying to persuade senior management to focus on customers and really mean it, by supporting initiatives like customer reference programs? The two arguments above — losing 50% of your customers every 4 years, and the 80%/ 8% discrepancy in perceived customer service — are pretty powerful arguments.