Lynn Stout's Arguments Against Shareholder Primacy

In the corporate setting, capitalism plays an important role in the sense that it helps ensure that the decisions made by leaders, such as the CEOs, take into consideration the company’s or stockholders’ interest in gaining profit (Peñaloza & Barnhart, 2011). This implies that it compels business leaders to make decisions that minimize loses while increasing the profitability of the firm. In most occasions, this is accomplished through the application of the utilitarian and Kantian approach to decision-making. However, it’s important to note that the central implication of public capitalism is that of helping foster corporate decision-making based on the broader effort to promote the public good (Peñaloza & Barnhart, 2011).

Over the years, firms have increasingly been maximising shareholder value. However, Steve Denning, a former director of the World Bank, author of six leadership and management books and columnist for Forbes, disagrees. His article “The Origin of the ‘World’s Dumbest Idea’: Milton Friedman”, was published on June 26, 2013 on Forbes, debates against Friedman’s argument that the social responsibility of corporations is to make money for its shareholders. The main issue here is whether the maximisation of shareholder value as the guiding principle of executives is detrimental to the corporation. Although Denning has exhibited valid points in his argument, his lack of citation, biased view on most arguments and his tone has dampened the credibility

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

Shareholder value revolution is a notion described in the book “Liquidated: An Ethnography of Wall Street” by Karen Ho. Shareholder value revolution is a shift of focus of corporations’ managers away from serving the interests of all the constituents of the corporation towards serving the interests solely of a shareholder class. As it was described by Karen Ho, shareholder value revolution came about as a result of the inefficiencies created by the conglomerate wave in the 1960s. These inefficiencies caused the takeover movement in the 1980s that in turn reinforced the interests of shareholders. According to Ho (2009), “In this worldview, corporation exist for the sole benefit of shareholders, and any attempt to separate shareholder interests from those of the corporation was selfish and nonsensical.” (p.

This paper examines the development and scope of accessory liability under the second limb of Barnes v Addy as it stands in both England and Australia. As to the law in England, the focus will be on the rearticulation of the principle of accessory liability under the second limb as stated in Royal Brunei Airlines Sdn Bhd v Tan. In particular, it will consider the extent to which the decision has reconciled inconsistencies in earlier authority and remedied those issues propounded to be inherent in the traditional formulation of the principle. At this stage, this traditional principle remains good law in Australia. However, as suggested in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, there is potential for the

To the extent of prevention of corporate failure, I argue that three ASX principles and recommendations could halt the demise of Dick Smith. Firstly, the 2nd principle which is “Structure the board to add value” by structuring the board with a majority of independent directors would prevent CEO dominance because some suggest that independent outside directors can reduce the influence of dominant individuals (ASX, 2014, p. 17). In accordance with Gallagher and Bennie (2015, p. 20), the independent directors are likely to focus on the company’s objectives and not to make decision relying on others. Furthermore, an addressing of independent directors would reduce the reliance on management, and create the effectiveness on monitoring (Dechow et al. 1996 cited in Christensen, Kent, and Stewart (2010)), as well as capability to lessen the conflict of interest between managers and shareholders (Hardjo & Alireza, 2012, p. 4). Thus, DSE’s board would be more active to monitor the CEO’s performances because independent directors pay attentions to the interest of company (Gallagher & Bennie, 2015, p. 20) and shareholders (Hardjo & Alireza, 2012, p. 4)

While they have arrangement and discharging control over the directors of the enterprise, shareholders in expansive organizations, for example, the criminogenic Shell, Exxon, Occidental Petroleum, Union Carbide, Dow Chemical, Ford Motors, La Roche-Hoffman, BHP, A.H. Robins, General Electric, Johns-Manville, James Hardie, all enterprises whose disregard and willful dismissal of surely understood norms of conduct has brought about shocking mischief, have minimal impetus to guarantee that these supervisors carry on legitimately. This happens because financial specialists who don't lawfully own the property of the company used to do any harm, they have no individual legitimate obligation regarding any such damages brought about by the misapplication of that property. The rich shareholders who are continually telling the riches less and poor people to be responsible and in charge of the route, in which they act and live, are, in law, unreliable for the (regularly detestable) behavior of their companies. It deteriorates the

Kluyver, C. (2013). A primer on corporate governance (2nd ed.). New York, NY: Business Expert Press.

Like several companies, Nortel stipendiary their executives with stock choices (Collins, 2011). This compensation solely inspired the tendency to be but honest regarding the company’s finances. author closely-held stock choices that solely inspired his actions to fulfill or beat the benchmark set by analysts. If Nortel’s earnings showed to be higher than the benchmark, Nortel’s stock costs would rise creating the stock closely-held by management to be even a lot of valuable. By tweaking the books to indicate the road earnings price as critical the allowable accumulation price he created the stakeholders assume that the corporate was creating extra money than it had been. “Nortel ne'er incomprehensible a benchmark over the sixteen quarters (Collins, 2011).” it had been too tempting to bump the numbers up so the stocks gave the impression to be value over they were. “Nortel’s accounting practices junction rectifier to AN investigation by AN freelance review committee, that found that insubordination with accumulation and accounting fraud were undertaken to fulfill internally obligatory earnings targets (Collins, 2011).”

1. Consider Dunlap’s statement on page 3 of the case: “Stakeholders! Every time I hear the word, I ask how much did they pay for their stake? There is only one constituency I am concerned about and that is the shareholder primacy? Do you agree or disagree with Dunlap’s view of shareholder primacy? Explain

This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees,

The above formula isolates free cash flows to the firm from earnings before interest and tax (EBIT). It can be noted that FCFF are after tax (1-T) but prior to interest expense. This initial overstatement of due tax is by design; the tax deductibility of interest payments will be accounted for when incorporating the after-tax cost of debt in the weighted average cost of capital (WACC) to determine the present value of free cash flows.

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.

The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression,

Nevertheless if companies operate in weak markets and fail to create growth and profit the concept of maximization of shareholder wealth is also an opportunity for self-regulation and security against threats for a company. This approach is in particular useful for safeguarding against difficulties arising from wrong or misguided leadership within a corporation. Shareholders of a company have the strongest interest in a company’s success because they often invest a lot of capital in the business and require revenues for their deposit (Moore, 2002). As a matter of fact, they become more