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In search of an alternative to shareholder value maximization

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  • Gaël Giraud

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ESCP-Europe - Campus de Paris)

  • Cécile Renouard

    ()
    (ESSEC Business School - ESSEC Business School)

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    Abstract

    This paper argues that mainstream economic theory, far from providing an indisputable plea in favor of shareholder value-maximization, offers striking arguments showing quite the opposite : profit-maximization cannot be a legitimate goal for private firms. This opens the door for a widening of a company's goal. We argue that it should include the concern of all the stakeholders of a company, and cannot be adequately addressed uniquely by Pigouvian taxes or by property rights. Coming to terms with this broad understanding of a company's goal should imply the internalization of the stakeholders' concern within the legal structure of the firm -- as in the case of the SCIC in France or the CIC in the UK.

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    Bibliographic Info

    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00611712.

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    Date of creation: Jul 2011
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    Handle: RePEc:hal:cesptp:halshs-00611712

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00611712
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    Related research

    Keywords: Corporate social responsibility; shareholder value; stakeholder value; incomplete markets; limited liability; property rights; collateral; cooperative.;

    This paper has been announced in the following NEP Reports:

    References

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    13. John Geanakoplos & Andreu Mas-Colell, 1985. "Real Indeterminacy with Financial Assets," Cowles Foundation Discussion Papers 770R, Cowles Foundation for Research in Economics, Yale University, revised Oct 1985.
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    16. Bruni, Luigino & Sugden, Robert, 2008. "Fraternity: Why The Market Need Not Be A Morally Free Zone," Economics and Philosophy, Cambridge University Press, vol. 24(01), pages 35-64, March.
    17. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
    18. Dierker, Egbert, 1987. "Increasing returns, efficiency, and the distribution of wealth," European Economic Review, Elsevier, vol. 31(1-2), pages 475-482.
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    21. Momi, Takeshi, 2001. "Non-existence of equilibrium in an incomplete stock market economy," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 41-70, February.
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