Value Creation and Corporate Governance

49 Pages Posted: 5 Nov 2020

See all articles by Steen Thomsen

Steen Thomsen

Copenhagen Business School; European Corporate Governance Institute (ECGI)

Date Written: October 13, 2020


Shareholder value maximization has been severely criticized in recent years, but it is not clear what, if anything, is to take its place. In this paper, we review three models of corporate value creation – shareholder value, stakeholder value, and company purpose achievement – and their implications for corporate governance. We first discuss shareholder value and how it is implemented through dispersed financial ownership, facilitation of takeovers, stock options and other mechanisms. Secondly, we discuss stakeholder value and its implementation through cooperatives, mutuals, employee representation and ESG indicators. Thirdly, we consider the more recent idea of a company purpose, which calls for responsible long-term ownership, management continuity and financial conservatism. We conclude that the purpose view may be the most promising alternative because it addresses weaknesses in the two other models by providing a clear social objective that is consistent with constrained profit maximization. However, we argue that agency problems and tensions with the broader interests of society are likely to persist regardless of value creation model.

Keywords: Value creation, ESG, sustainability, shareholder value, corporate objectives, performance measures, corporate governance

JEL Classification: G32, G34, L21

Suggested Citation

Thomsen, Steen, Value Creation and Corporate Governance (October 13, 2020). Available at SSRN: or

Steen Thomsen (Contact Author)

Copenhagen Business School ( email )

Porcelaenshaven 24A
Copenhagen, 2000
+45 38152590 (Phone)
+45 38152500 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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