The Corporate Objective Revisited

Organization Science, Vol. 15, No. 3, pp. 350-363, May-June 2004

Posted: 21 Sep 2004

See all articles by Anant K. Sundaram

Anant K. Sundaram

Tuck School of Business at Dartmouth

Andrew C. Inkpen

Thunderbird School of Management

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The stock market convulsions and corporate scandals of 2001 and 2002 have reignited debate on the purposes of the corporation and, in particular, the goal of shareholder value maximization. We revisit the debate, re-examine the traditional rationales, and develop a set of new arguments for why the preferred objective function for the corporation must unambiguously continue to be the one that says "maximize shareholder value." We trace the origins of the debates from the late nineteenth century, their implications for accepted law and practice of corporate governance in the United States, and their reflection in shareholder versus stakeholder views in the organization studies literature and contractarian versus communitarian views in the legal literature. We address in detail possible critiques of the shareholder value maximization view. Although we recognize certain boundary constraints to our arguments, we conclude that the issues raised by such critiques and constraints are not unique to the shareholder value maximization view, but will exist even if the firm is managed on behalf of nonshareowning stakeholders.

Keywords: Shareholder value, stakeholder theory, corporate goal, corporate governance

JEL Classification: G3, K22, L21

Suggested Citation

Sundaram, Anant K. and Inkpen, Andrew, The Corporate Objective Revisited. Organization Science, Vol. 15, No. 3, pp. 350-363, May-June 2004, Available at SSRN:

Anant K. Sundaram (Contact Author)

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-8248 (Phone)
603-646-1308 (Fax)

Andrew Inkpen

Thunderbird School of Management ( email )

15249 N 59th Ave.
Glendale, AZ 85306
United States

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