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To those who believe that stakeholder wealth maximization will usher in a period of common good, with society, customers and employees benefiting from more compassionate corporatism, I offer you two cautionary counter examples. As an advocate for shareholder wealth maximization, I would love to live in a world where the market rewarded companies that try to do the right thing, since it would make good behavior entirely consistent with value maximization. I think that we are making strides on the first, with better information disclosure from companies and CSR measures, and I hope to help on the second front by connecting these disclosures to intrinsic value. Your job as a top manager or CEO is to pay not just a fair, but a living wage, even if you cannot afford it as a company, but also deliver maximum value to your customer, preserve society’s best interests and ensure that your business stays competitive, while also making sure that you deliver the returns your boutiques near me holders and lenders desire. I know that this is a trying time to be a corporate CEO, with people demanding that you cure society’s ills and the economy’s problems, with the threat of punitive actions, if you don’t change.
You don’t have to do anything other than watch it happen. That said, I don’t believe that you can win this battle or even recoup some of your lost standing by giving up on the focus on shareholder wealth and replacing it with an ill-thought through and potentially destructive objective of advancing stakeholder interests. That said, I am a realist and accept that some constraints have to be imposed by governments, regulators and rule writers, and that some companies, especially ones with strong profitability and substantial slack in their business models, may accept self constraints. A Return to the Past: Since the business roundtable is composed of CEOs, many of whom have felt the heat of activist investors and pushy shareholders, the cynic in you may lead you to conclude that what the CEOs in the Roundtable would like to see is a return to the good old days of managerial corporatism, where they could rule their companies with little push back, and that this push for stakeholder interests is a diversionary tactic. As I noted earlier, if we want companies to behave better in their interactions with society, customers and employees, we have to make it in their financial best interests to do so, buying products and services from companies that treat other stakeholders better and paying higher prices for their shares.
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