Around the Institute

Joe Nocera Rebukes Shareholder Value Focus

August 14, 2012  • Miguel Padró

This past weekend, New York Times columnist Joe Nocera debunked the notion that a corporation’s primary duty is maximizing shareholder value, highlighting how this decades-old philosophy is now being reconsidered by a growing number of academics and practitioners. The soul searching is being driven in part by a recognition that maximizing shareholder value has not produced the outcomes for investors, companies, or society that its early advocates envisioned, he says. Nocera also calls for executives to further their companies by providing goods and services, employing workers, and emphasizing other metrics of value besides stock price, and cites “The Shareholder Value Myth” by Cornell Law School professor and Institute Business and Society Program Advisory board member Lynn Stout, which addresses the issue from a legal perspective. 

The Business and Society Program renewed its focus on re-thinking the purpose of business in early 2011 by hosting a series of roundtables with prominent legal and business scholars, as well as select practitioners from the world of business and investment. This work aims to broaden the purpose of the corporation beyond profit maximization through a deeper understanding of the corporation as a value-creating entity. To learn more about the Business and Society Program’s exploration of the merits of business to society beyond shareholders, as discussed by Nocera, click here.