Interesting read. Was it the shareholders who launched the “purpose of the corporation is to maximize shareholder wealth”? Governance, leadership and board of directors
Excerpt: The purpose of a corporation is to maximize shareholder wealth. And a corporation’s board of directors’ chief fiduciary responsibility is to shareholders.
These are plain and simple facts — and have been so forever. Right?
No, and no, actually. The idea that shareholder value should be the organizing principle of the corporation is of relatively recent vintage — it was only in the 1990s that it really became widely accepted — and as legal scholar Lynn Stout keeps explaining, corporate law has far from fully embraced it. Which makes the statements in the first sentence just arguments, not facts.
Now, as Joe Nocera wrote last week in The New York Times, there’s a “movement” gaining strength to replace shareholder value with a broader definition of corporate purpose that includes satisfying customers, providing good jobs, even paying taxes. I am now a card-carrying member of this movement, thanks to my article with Jay Lorsch in the July/August HBR, “What Good Are Shareholders?”
There is, however, a big barrier standing in the way of the movement’s triumph ….