Corporations and Stakeholders

Many people believe, improperly, the only obligation corporations have is to maximize shareholder returns. This is a belief encouraged by repetitive assertion and open eared credulity.

But there is “no law [that] requires corporations to maximize returns to share holders

In fact … No such law in any of the 50 states even raises the topic of maximizing shareholder returns. ”

The idea that corporations exist to reward their shareholders arose not in a body of law but from the work of ideologically driven economists. In 1970, Milton Friedman wrote that business properly had but one goal: to maximize profits. The same year, Friedman’s University of Chicago colleague Eugene Fama argued that a corporation’s share price was always the accurate reflection of the enterprise’s worth, an idea that trickled down into the belief that the proper goal of a corporation was to boost its share value — particularly after most CEO salaries and bonuses became linked to that value.

Read All at WaPo

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