The corporate objective revisited

Anant K. Sundaram, Andrew Inkpen

    Research output: Contribution to journalArticle

    296 Citations (Scopus)

    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)
    JournalOrganization Science
    Volume15
    Issue number3
    StatePublished - May 2004

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    Keywords

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

    ASJC Scopus subject areas

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

    Cite this

    The corporate objective revisited. / Sundaram, Anant K.; Inkpen, Andrew.

    In: Organization Science, Vol. 15, No. 3, 05.2004.

    Research output: Contribution to journalArticle

    Sundaram, Anant K. ; Inkpen, Andrew. / The corporate objective revisited. In: Organization Science. 2004 ; Vol. 15, No. 3.
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