What Does ‘Shareholder Value’ Really Mean?

James Post and others argue that a well-run company can—and should—be managed in a way that benefits not just the investors who own its stock, but a wide range of constituents. As opposed to “shareholders,” they call these people “stakeholders”: a group that includes employees, customers, suppliers, and creditors, as well as the broader community in which the company operates, and even the country that it calls home. According to that view, Market Basket’s employees and customers are essential to the firm’s success and, thus, rightful beneficiaries of its prosperity.

Importantly, it’s not just antimarket leftists who are making this point: It’s pro-business thinkers who want to see a more competitive future for American corporations. Critics like Post argue that the singleminded emphasis on profits and shareholder value—which took hold in the corporate world during the 1980s—has actually hurt corporations in a number of ways, giving their leaders the wrong kinds of incentives, gutting their future in pursuit of short-term profits, and often draining them of their real value and putting them at odds with their communities.

Leon Neyfakh, in the Boston Globe, on the case against “shareholder value” as the lone measure of business success.

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Photo: walmartcorporate, Flickr