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In search of an alternative to shareholder value maximization

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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

Suggested Citation

  • Gaël Giraud & Cécile Renouard, 2011. "In search of an alternative to shareholder value maximization," Documents de travail du Centre d'Economie de la Sorbonne 11038, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:11038
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    More about this item

    Keywords

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

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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