Maximizing shareholder value: a new ideology for
Corporate GovernanceWilliam Lazonick and Mary O’Sullivan
AbstractThe decade-long boom in the US stock market and the more recent boom in the USeconomy have fostered widespread belief in the economic bene ts
代写留学生论文of the maximizationof shareholder value as a principle of corporate governance. In this paper, weprovide an historical analysis of the rise of shareholder value as a principle of corporate
governance in the United States, tracing the transformation of US corporate
strategyfrom an orientation towards retention of corporate earnings and reinvestment incorporate growth through the 1970s to one of downsizing of corporate labour forcesand distribution of corporate earnings to shareholders over the past two decades. Wethen consider the recent performance of the US economy, and raise questions about
the relation between the maximization of shareholder value and the sustainability ofeconomic prosperity.
Keywords: shareholder value; corporate governance; corporate strategy; US economy.
Introduction
Over the past two decades the ideology of shareholder value has become
entrenched as a principle of corporate governance among companies based inthe United States and Britain. Over the past two or three years, the rhetoric ofshareholder value has become prominent in the corporate governance debates inEuropean nations such as Germany, France and Sweden. Within the past year,
Copyright © 2000 Taylor & Francis Ltd 0308-5147
Economy and Society Volume 29 Number 1 February 2000: 13–35
William Lazonick and Mary O’Sullivan, INSEAD, Boulevard de Constance, 77305Fontainebleau Cedex, France. E-mail:
[email protected];
[email protected] arguments for ‘maximizing shareholder value’ have even achieved prominence
in Japan. In 1999 the OECD issued a document, The OECD Principles of
Corporate Governance, that emphasizes that corporations should be run, rst and
foremost, in the interests of shareholders (OECD 1999).
But what does ‘maximizing shareholder value’ mean? Is it an appropriate principle
for the governance of corporations in the advanced economies in the
twenty- rst century? Does the implementation of this principle improve the
competitive performance of corporate enterprises? Would the reform of the
continental European and Japanese systems of corporate governance based on
the principle of maximizing shareholder value bring sustainable prosperity to
these economies?
In the so-called Anglo-Saxon economies of the United States and Britain, the
exclusive focus of corporations on shareholder value is a relatively recent
phenomenon, having risen to prominence in the 1980s as part and parcel of the
Reaganite and Thatcherite revolutions. The decade-long boom in the US stock
market and the more recent boom in the US economy have impressed European
and Japanese corporate executives with the potential of shareholder value as a
principle of corporate governance, while American institutional investors,
investment bankers and management consultants have incessantly promoted thevirtues of the approach in Europe and Japan.
There is, however, in both Europe and Japan, considerable misinformation
about why shareholder value has become so prominent in the governance of UScorporations over the past two decades and the actual impact of its implementationon the performance of US corporations and the US economy. The
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