Unrealized Potential: Misconceptions About Corporate Purpose and New Opportunities for Business Education

14 Pages Posted: 31 May 2014

See all articles by Miguel Padro

Miguel Padro

The Aspen Institute Business & Society Program

Date Written: May 29, 2014

Abstract

The dominant conception of the corporation today is that firms exist to maximize value for shareholders. Unfortunately, a narrow understanding of this paradigm causes many business leaders to believe that they are legally and morally obligated to maximize stock price for their investors. This conventional wisdom unnecessarily constrains thinking about the role of corporations in the long-term health of society. In doing so, it may also be an impediment to building the skills that companies, investors, and society are demanding from corporate leaders. We clarify the widespread assumption that shareholders own the corporation, then explore the implications for what is being taught to business students about value creation, risk, accountability, good management, and good governance. Business education is uniquely positioned to develop business leaders and investors who exercise sound judgment, resist the allure of the short term, and thus help realize the full potential of the corporate form.

Keywords: Corporate Purpose, Short termism, Shareholder Value, Shareholder Primacy, Corporate Governance, Long Term, Value Maximization, Sustainability, Corporate Accountability, Corporate Responsibility, Agency Theory, Stakeholders, Fiduciary Duty

JEL Classification: G32, G34, G38, H32, K22, L21, M10, M14

Suggested Citation

Padro, Miguel, Unrealized Potential: Misconceptions About Corporate Purpose and New Opportunities for Business Education (May 29, 2014). Available at SSRN: https://ssrn.com/abstract=2443352 or http://dx.doi.org/10.2139/ssrn.2443352

Miguel Padro (Contact Author)

The Aspen Institute Business & Society Program ( email )

477 Madison Avenue, Suite 730
New York, NY 10022
United States

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