In Search of an Alternative to Shareholder Value Maximization

Abstract

This paper argues that mainstream economic theory, far from providing an indisputable plea in favor of shareholder value-maximization, offers striking arguments showing quite the opposite: profit-maximization cannot be a legitimate prioritarian goal for private firms. This opens the door for a widening of a company's goal. We argue that it should include the concern of all the stakeholders of a company, and cannot be adequately addressed uniquely by Pigouvian taxes or by property rights. Coming to terms with this broad understanding of a company's goal should imply the internalization of the stakeholders' concern within the legal structure of the firm -- as in the case of the SCIC in France or the CIC in the UK.

Keywords: Corporate social responsibility, shareholder value, stakeholder value, incomplete markets, limited liability, property rights, collateral, cooperative

JEL Classification: A12, D21, D63, K11, L21, L33, M14