Should the Modern Corporation Maximize Shareholder Value?

Fifty years ago this year, Milton Friedman, later to be a Nobel laureate in economics, famously argued that corporate governance should focus solely on shareholder value maximization, while conforming to applicable laws and regulations.  That view was controversial then.  After years of dominance as a governance idea, shareholder primacy is once again controversial.  We argue that it is more or less still correct.

Recently, the Business Roundtable’s Statement on the Purpose of a Corporation commits the board to other stakeholders as well — including customers, employees, suppliers, and communities the company operates in. But importantly, if labor markets and product … Read more