The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Sat, 04 Jul 2026 11:30:32 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Why Financialized Corporate Governance Works Poorly – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Why Financialized Corporate Governance Works Poorly https://corpgov.law.harvard.edu/2017/08/09/why-financialized-corporate-governance-works-poorly/?utm_source=rss&utm_medium=rss&utm_campaign=why-financialized-corporate-governance-works-poorly https://corpgov.law.harvard.edu/2017/08/09/why-financialized-corporate-governance-works-poorly/#comments Wed, 09 Aug 2017 13:01:10 +0000 https://corpgov.law.harvard.edu/?p=100669?d=20170816111706EDT Posted by Anat R. Admati, Stanford University, on Wednesday, August 9, 2017
Editor's Note:

Anat R. Admati is George G.C. Parker Professor of Finance and Economics at Stanford Graduate School of Business. This post is based on Professor Admati’s recent article, published in the Journal of Economic Perspectives.

Corporate finance textbooks describe shareholders as the owners of a corporation and teach future managers how to create “shareholder value.” Increasing shareholder value is generally seen synonymous with increasing “shareholder wealth” as measured by the market value of their shares. The academic literature views conflicts between managers and shareholders as the main challenge of corporate governance. Common practices to align managers’ interests with those of shareholders include paying managers with stocks or options and rewarding them based on financial metrics such as (accounting) profits and return on equity.

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