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Article
Publication date: 13 July 2022

Jonathan Myers

The 2008 Crash (the Crash) has been attributed to the dominance of financialized corporate governance, particularly an increased shareholder value rhetoric. Following the Crash…

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Abstract

Purpose

The 2008 Crash (the Crash) has been attributed to the dominance of financialized corporate governance, particularly an increased shareholder value rhetoric. Following the Crash, this extreme narrative is understood to have become less financialized through increasingly favouring stakeholders. The purpose of this research is to investigate this often-accepted view using field theory, wherein managers' biases in the value-creating process result from an interconnected, dynamic, multi-actor discourse.

Design/methodology/approach

Various domains across the UK’s corporate governance environment, from the perspective of field theory, generate the complex discourse: corporate and regulatory domains, stakeholder organizations such as the press and think tanks. Domain-specific corpora, representative of this multi-actor field, were constructed, with financialization analysed by assessing managers’ altering biases concerning the relative importance of shareholders and stakeholders (amongst other factors like time horizon) to value creation.

Findings

Highlights of the multiple findings include the following: corporate narrative about value creation became less financialized following the Crash, yet favouring shareholders, while the multi-actor discourse for the UK economy as a whole became slightly more financialized.

Originality/value

Analysing a multi-actor discourse is complex. And this, to the best of the author’s knowledge, is the first study of its kind, and only made possible with the original methodology of narrative staining. The approach, while having particular relevance to field theory, is applicable to many other narrative-based research scenarios.

Details

Qualitative Research in Financial Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1755-4179

Keywords

Book part
Publication date: 27 January 2022

Olivier Butzbach

In the “shareholder primacy” (SP) view of the modern corporation, shareholders are endowed with ownership rights over the corporation. This view stems from the property rights and…

Abstract

In the “shareholder primacy” (SP) view of the modern corporation, shareholders are endowed with ownership rights over the corporation. This view stems from the property rights and agency theories of the business firm formulated by financial and business economists in the 1970s and 1980s, which subsequently fed into US corporate law debates. It relies on positive legal assumptions that have largely been debunked by legal scholars, and on normative economic ideas that are equally problematic. However, SP is still very influential – if not the dominant paradigm of corporate governance, especially in the United States. The goal of the present study is to come back to the theoretical debates around the foundations of the SP paradigm to seek to identify key ideational properties that may explain, in part, the resilience of such paradigm in policy, scholarship and business practice. In particular, this paper proposes that one important reason for the persistence of the SP ideology lies in the latter’s foundation on the radically contingent nature of shareholders’ claims over the corporation.

Details

The Corporation: Rethinking the Iconic Form of Business Organization
Type: Book
ISBN: 978-1-80043-377-9

Keywords

Article
Publication date: 2 November 2023

Janice Wobst, Parvina Tanikulova and Rainer Lueg

The purpose of this article is to synthesize the topics, conceptualizations and measurements of value-based management (VBM) and to suggest a research agenda covering its next…

Abstract

Purpose

The purpose of this article is to synthesize the topics, conceptualizations and measurements of value-based management (VBM) and to suggest a research agenda covering its next evolution as sustainable governance.

Design/methodology/approach

The authors conducted a systematic literature review of 80 seminal studies published between 1979 and 2022. The authors synthesized the studies by their conceptualizations of VBM in an inductively developed framework.

Findings

The authors find that scholars explore diverse topics related to VBM with a prevailing focus on shareholder primacy. There is a paucity of studies that focus on the integration of shareholder maximization and stakeholder management practices. The authors explain which studies will form a promising foundation for advanced research on sustainable governance that will reach beyond current VBM research.

Originality/value

The authors' research agenda addresses new future topics on conflicting goals within and between shareholder groups, offers specific suggestions for using new research methods and untapped data sources for VBM and paves the way to substantially extend the boundaries of the firm in VBM research to include stakeholders, strategic alignment and new sustainability measures.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 7 July 2021

Lenore Palladino

The mainstream framework for corporate governance is that all corporate activity should be directed towards shareholder wealth maximization. This article posits that public policy…

Abstract

Purpose

The mainstream framework for corporate governance is that all corporate activity should be directed towards shareholder wealth maximization. This article posits that public policy should move away from shareholder primacy and instead recognize employees as key contributors to corporate value-creation. One way to implement this approach is to require the creation of Employee Equity Funds (EEFs) at large corporations, which would pay employees dividends alongside external shareholders and establish a collective employee voice in corporate governance. EEFs may reduce economic inequality while improving firm performance and macroeconomic stability. This article provides an original estimate of average employee dividends, illustrating the potential of employee equity funds.

Design/methodology/approach

Analysis of employee dividends for Employee Equity Funds at large U.S. corporations, using publicly available corporate finance data.

Findings

Based on historic dividend payments and employee counts in public 10-K filings, I find that, if EEFs held 20% of outstanding equity, the average employee dividend across this sample would be $2,622 per year, while the median is $1,760. This indicates that employee dividends can be a small but meaningful form of redressing wealth inequality for the low-wage workforce, though it should emphatically not be seen as a replacement for fair wages.

Originality/value

Original data analysis of a proposed policy reform to increase the benefits of employee equity in the United States.

Details

Journal of Participation and Employee Ownership, vol. 5 no. 1
Type: Research Article
ISSN: 2514-7641

Keywords

Article
Publication date: 13 July 2015

Chrispas Nyombi

– The purpose of this paper is to determine whether the Board Neutrality Rule and the primacy afforded to shareholders during takeovers is justified under common law and policy.

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Abstract

Purpose

The purpose of this paper is to determine whether the Board Neutrality Rule and the primacy afforded to shareholders during takeovers is justified under common law and policy.

Design/methodology/approach

The paper provides a detailed assessment of the role play by the board neutrality rule and whether this is supported by takeover law and Company law. A review of case law and statutes is provided. The paper is largely analytical.

Findings

The paper finds little justification for the continued imposition of the Board Neutrality Rule.

Originality/value

The paper adds to the growing body of research literature which has analysed the role played by the Board Neutrality Rule during takeovers.

Details

International Journal of Law and Management, vol. 57 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 2 January 2009

Michael E. Raynor

Many investors view maximizing shareholder wealth as the only obvious and defensible, corporate objective function. But to contradict this view, the paper aims to consider the

3646

Abstract

Purpose

Many investors view maximizing shareholder wealth as the only obvious and defensible, corporate objective function. But to contradict this view, the paper aims to consider the shortcomings of the “shareholder first” view and offer an alternative.

Design/methodology/approach

To make strategic tradeoffs effectively the whole organization needs a clear sense of what it is trying to achieve, and how choosing between specified alternatives serves its highest goal. Organizations need a “best metric” for the corporate strategy. The paper considers what ultimate end should corporations – that is, the managers who run them – refer to when making these difficult and sometimes painful tradeoffs?

Findings

The widely held shareholder‐value view holds that every choice should be made with an eye to creating as much financial wealth as possible for the providers of equity capital. But none of the familiar justifications for this view stand up to scrutiny. It is not true that: shareholders are owners; shareholders bear the most risk; maximizing shareholder value is a clear goal; and maximizing shareholder value is a legal requirement.

Practical implications

The corporation‐first view is a better alternative principle. It is that the ultimate purpose of the corporation is the survival of corporation itself. The corporation should not seek to maximize the interests of shareholders, or employees, or suppliers, or the environment, or anyone or anything else. The Costco model is examined.

Originality/value

This paper provokes some serious soul‐searching about the largely unquestioned primacy of shareholder interests as the objective function of the corporation and makes the case for a better alternative.

Details

Strategy & Leadership, vol. 37 no. 1
Type: Research Article
ISSN: 1087-8572

Keywords

Article
Publication date: 28 October 2003

Frederick R. Post

Shareholder Theory allows management to ignore the interests of the other constituencies while pursuing its own narrow self‐interest under the guise (the ethical facade) of…

1080

Abstract

Shareholder Theory allows management to ignore the interests of the other constituencies while pursuing its own narrow self‐interest under the guise (the ethical facade) of promoting the interests of the shareholder owners. The Shareholder Theory does not provide any relistic counterweight against management abuse. The Enron example strengthens the arguments for the use of Stakeholder theory and exposes the utter failure of the Shareholder Theory.

Details

American Journal of Business, vol. 18 no. 2
Type: Research Article
ISSN: 1935-5181

Keywords

Book part
Publication date: 19 May 2009

David Millon

The essay points out a common thread that runs through law-and-economics business law scholarship. Working largely independently of each other, economically oriented scholars…

Abstract

The essay points out a common thread that runs through law-and-economics business law scholarship. Working largely independently of each other, economically oriented scholars working in different areas have argued that the law should focus on the interests of a single constituency – shareholders in corporate law, creditors in bankruptcy law, and consumers in antitrust law. Economic analysts thus have rejected arguments advanced by “progressive” scholars working in each of these areas that the law should instead concern itself with the full range of constituencies affected by business activity. The law-and-economics single constituency claim rests in part on skepticism about judicial competence, but the underlying premise is an objection to the use of law for redistributive purposes. The primary value is efficiency, defined in terms of market-generated outcomes. It is argued here that this political commitment implies a strong tendency toward maintenance of the existing distribution of wealth, and that even more importantly, the single constituency claim may actually have redistributive implications. In each of these areas of business law, however, a regressive program favors owners of capital against those who are generally less well off, such as workers and small-business owners.

Details

Law & Economics: Toward Social Justice
Type: Book
ISBN: 978-1-84855-335-4

Book part
Publication date: 16 December 2016

Thomas Clarke and Soheyla Gholamshahi

The purpose of this chapter is to analyse how in recent years the rediscovery that extreme inequality is returning to advanced economies and has become widespread. What is at…

Abstract

Purpose

The purpose of this chapter is to analyse how in recent years the rediscovery that extreme inequality is returning to advanced economies and has become widespread. What is at issue are the causes of this inequality. It is becoming clear that the wider population, particularly in Anglo-American economies have not shared in the growing wealth of the countries concerned, and that the majority of this wealth is being transferred on a continuous and systemic basis to the very rich. Corporate governance and the pursuit of shareholder value it is argued has become a major driver of inequality.

Methodology/approach

The current statistical evidence produced by leading authorities including the US Federal Reserve, World Economic Forum, Credit Suisse and Oxfam are examined. The policy of shareholder value and the mechanisms by which the distributions from business take place are investigated from a critical perspective.

Findings

While the Anglo-American economies are seeing a return to the extremes of inequality last witnessed in the 19th century, the causes of this inequality are changing. In the 19th century great fortunes often were inherited, or derived by entrepreneurs from the ownership and control of productive assets. By the late 20th century as Atkinson, Piketty and Saez (2011) and others have highlighted, the sustained and rapid inflation in top income shares have made a significant contribution to the accelerating rate of income and wealth inequality.

Research implications

The intensification of inequality in advanced industrial economies, despite the consistent work of Atkinson and others, was largely neglected until the recent research of Picketty which has attracted international attention. It is now acknowledged widely that inequality is a serious issue; however, the contemporary causes of inequality remain largely unexplored.

Practical/social implications

The significance of inequality, now that it is recognized, demands policy and practical interventions. However, the capacity or even willingness to intervene is lacking. Further analysis of the debilitating consequences of inequality in terms of the efficiency and stability of economies and societies may encourage a more robust approach, yet the resolve to end extreme inequality is not present.

Originality/value

The analysis of inequality has not been neglected and this chapter represents a pioneering effort to relate the shareholder value orientation now dominant in corporate governance to the intensification of inequality.

Details

Finance and Economy for Society: Integrating Sustainability
Type: Book
ISBN: 978-1-78635-509-6

Keywords

Article
Publication date: 13 July 2015

Philip J Wells

The purpose of this paper is to provide a critical analysis of the various proposals to regulate executive pay in the UK. Situated within a corporate governance context, it…

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Abstract

Purpose

The purpose of this paper is to provide a critical analysis of the various proposals to regulate executive pay in the UK. Situated within a corporate governance context, it focuses on using shareholder empowerment as a mechanism to formulate a regulatory strategy to quell the continued furore that surrounds the issue.

Design/methodology/approach

Using an expansive array of different academic materials, the paper adopts the approach of using critical analysis to provide an original insight into the popular and contentious issue of executive remuneration.

Findings

The paper finds that the UK Government’s current proposal to regulate executive remuneration, via the shareholder empowerment device of a binding vote on remuneration, will primarily consist of symbolic rather than practical significance.

Social implications

The paper provides important social implications, as it provides a new prospective and insight into the well-covered issue of executive remuneration.

Originality/value

The paper draws on a host of traditional and modern academic materials to create a new viewpoint on the issue of remuneration. Moreover, the paper is original insofar that it ties the issue of shareholder empowerment into the conceptual design and formulation of company law and corporate law theory.

Details

International Journal of Law and Management, vol. 57 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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