Optimist>The Optimist

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Executives, investors and the business press routinely chant the mantra that corporations are required to “maximize shareholder value.” The results have been disastrous, believes business law professor Lynn Stout. “Shareholder primacy” thinking causes corporate managers to focus myopically on short-term earnings reports at the expense of long-term performance; discourages investment and innovation; harms employees, customers, and communities; and causes companies to indulge in reckless, sociopathic and socially irresponsible behaviors, she says. It’s the kind of thinking that led directly to the recent worldwide economic collapse.

Lynn Stout demonstrates that there is no legal obligation for corporations to maximize shareholder value—scholars, lawyers, and corporate officers just assumed there was. Nor, she says, is maximizing shareholder value the optimal economic model—that’s just another unproven assumption, one she considers conceptually muddled. During this event, Stout will explain how shareholder value thinking came about and how we can change our thinking to create a better economy.

Why you should register

“Shareholder value thinking is endemic in the business world today. Fifty years ago, if you had asked the directors or CEO of a large public company what the company’s purpose was, you might have been told the corporation had many purposes: to provide equity investors with solid returns, but also to build great products, to provide decent livelihoods for employees and to contribute to the community and the nation. Today, you are likely to be told the company has but one purpose, to maximize its shareholders’ wealth. This sort of thinking drives directors and executives to run public firms with a relentless focus on raising stock price.”

This is one of the passages from The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public (Berrett Koehler 2012), in which Lynn Stout explains what harm the focus on increasing shareholder value has done to our economy. It’s time to rethink the wisdom of shareholder value, she concludes. 

During this time of financial crisis, economic difficulties and many questions about how to resolve these systemic problems in our society, Stout offers a refreshing perspective. During this event she will give insight into how maximizing shareholder value became so important to our economy and how abandoning this mantra could create an society more focused on human values that benefits us all.

Reviews of Lynn Stout’s book,The Shareholder Value Myth

Calm, careful, plainspoken and relentless argumentation that peels away the distracting layers of abstract mumbo jumbo to expose the lunacy of the underlying theory for all to see. Lynn Stout does the world a great favor in exposing shareholder value theory for what it is: flawed and damaging.
 —Roger Martin, Dean, Rotman School of Management, University of Toronto, and author of Fixing the Game

A must-read for managers, directors and policymakers interested in getting America back in the business of creating real value for the long term.
 —Constance E. Bagley, Professor, Yale School of Management and author of Managers and the Legal Environment and Winning Legally
 
 A compelling call for radically changing the way business is done…The Shareholder Value Mythpowerfully demonstrates both the dangers of the shareholder value rule and the falseness of its alleged legal necessity.
 —Joel Bakan, Professor, The University of British Columbia, and author of the book and film The Corporation

Lynn Stout has a keen mind, a sharp pen and an unbending sense of fearlessness. Her book is a must-read for anyone interested in understanding the root causes of the current financial calamity.
 —Jack Willoughby, Senior Editor, Barron’s

Lynn Stout offers a new vision of good corporate governance that serves investors, firms and the American economy.
 —Judy Samuelson, Executive Director, Business and Society Program, The Aspen Institute