The corporate objective revisited

Anant K. Sundaram, Andrew C. Inkpen

Research output: Contribution to journalReview article

314 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)350-363+373
JournalOrganization Science
Volume15
Issue number3
DOIs
StatePublished - 2004

Keywords

  • Corporate goal
  • Corporate governance
  • Shareholder value
  • Stakeholder theory

ASJC Scopus subject areas

  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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