Corporations today operate according to a model of corporate governance known as “shareholder primacy.” This theory claims that the purpose of a corporation is to generate returns for shareholders, and that decision-making should be focused on a singular goal: maximizing shareholder value. This single-minded focus—which often comes at the expense of investments in workers, innovation, and long-term growth—has contributed to today’s high-profit, low wage economy.

Many business leaders, policymakers, and average Americans accept this doctrine of corporate governance as “natural” law—the unshakeable reality of business. However, shareholder-focused corporations are not natural market creations, and the idea of “maximizing shareholder value” is relatively recent. This misguided focus, driven by the neoliberal conception of shareholders as the only actor within the firm who is critical to corporate success, is the result of decades of flawed theory in corporate law and policy. Increasing economic evidence suggests that shareholder primacy is not benefiting other corporate stakeholders, including workers, suppliers, consumers, or communities.

(more…)