Shareholder Value, Corporate Governance and Corporate Performance: A Post-Enron Reassessment of the Conventional Wisdom

30 Pages Posted: 10 Dec 2003

See all articles by Margaret M. Blair

Margaret M. Blair

Vanderbilt University - Law School


The notion that the primary, or in extreme versions, the only legitimate goals of corporate management and governance should be to maximize the value of the shareholders' interest in the company is based on a series of elegant and facile, but deeply flawed assumptions about the nature of the relationships among corporate participants, about how financial markets work, about how human beings work together in groups, and about what the law requires. Contrary to these assumptions, shareholders are neither the "owners" of corporations, nor the only claimants with investments at risk; stock prices do not always accurately reflect the true underlying value of equity securities; managers will not necessarily do a better job of running corporations if they focus solely on share value, or if they are heavily incentivized with stock options, or if they are constantly vulnerable to being ousted in a hostile takeover; and corporate law does not require shareholder primacy.

Instead, this essay suggests that, once basic societal and business institutions are in place, such as rule of law, sophisticated and uncorrupted courts, an independent accounting profession, liquid financial markets and an adequate securities regulation system, the principle element needed to foster wealth creating productive activity may be a powerful set of cultural norms emphasizing personal and group integrity, cooperative behavior among team members, and responsibility in the team's relationships to the larger communities in which it operates.

Suggested Citation

Blair, Margaret M., Shareholder Value, Corporate Governance and Corporate Performance: A Post-Enron Reassessment of the Conventional Wisdom. CORPORATE GOVERNANCE AND CAPITAL FLOWS IN A GLOBAL ECONOMY, Peter K. Cornelius and Bruce Kogut, eds., Oxford University Press, January 2003. Available at SSRN: or

Margaret M. Blair (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-6087 (Phone)

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