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Re-Imagining Capitalism$
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Dominic Barton, Dezsö Horváth, and Matthias Kipping

Print publication date: 2016

Print ISBN-13: 9780198785453

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780198785453.001.0001

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“Maximizing Shareholder Value” Is an Unnecessary and Unworkable Corporate Objective

“Maximizing Shareholder Value” Is an Unnecessary and Unworkable Corporate Objective

(p.159) 12 “Maximizing Shareholder Value” Is an Unnecessary and Unworkable Corporate Objective
Re-Imagining Capitalism

Lynn Stout

Oxford University Press

chapter argues that “maximizing shareholder value” is unnecessary and unworkable as a business objective. Each element—maximize, shareholder, and value—is problematic. First, while maximizing a single objective is supposedly necessary to hold managers accountable, systems analysis provides a proven alternative methodology for assessing and improving managerial performance, and demonstrates why satisficing multiple objectives is often preferable to maximizing one. Second, because shareholders are individuals with differing investment concerns, there is no uniform shareholder interest. Third, unless “value” is measured by short-term metrics like profits or share price, the concept is too abstract and unobservable to provide an objective measure of performance.

Keywords:   shareholder value maximization, short termism, corporate governance, corporate purpose, US legal framework

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