Tag: agency theory

Does the health of the economy depend on getting the role of shareholders right?

Are shareholders really the “owners” of corporations? Even though shareholders have no responsibilities to the corporations they “own”? Should corporations be managed for the sole purpose of maximizing shareholder value?  Are shareholders even unanimous in that objective? Is shareholder centricity really the right model for good governance of corporations? What changes in corporate governance have been fueled by the shareholder primacy model?  Do those changes make sense?  What has been the adverse fallout from the current fastidious devotion to shareholder preeminence?  These are just some of the issues addressed in this terrific piece by two Harvard Business School professors, Joseph L. Bower and Lynn S. Paine, in the Harvard Business Review. In their view, the “health of the economic system depends on getting the role of shareholders right.”  Highly recommend.