Why maximizing shareholder value is finally dying:
against the wider interests of society. In 1975, it helped defeat anti-trust legislation. In 1977, it helped defeat a plan for a consumer protection agency and successfully blocked labor law reform. In 1985, it successfully lobbied for a reduction in corporate taxes.
The result? By 2019, maximizing shareholder value has come to be seen as leading to a toxic mix of soaring short-term corporate profits, astronomic executive pay, along with stagnant median incomes, growing inequality, periodic massive financial crashes, declining corporate life expectancy, slowing productivity, declining rates of return on assets and overall, a widening distrust in business.
We will thus soon be hearing many more preachy corporate purpose statements with a capital"P", that sound good but have little or no actionable content. From outside the corporation, it may be even more difficult to figure out what goals firms are really pursuing. This is a principal reason why shareholder value theory emerged in the first place. In 1970, Friedman took the logical step and said that if organizations are confused, let them focus on one goal: shareholders.
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