From shareholder primacy to stakeholder capitalism
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From shareholder primacy to stakeholder capitalism
For many years, the conventional wisdom held that corporate executives should focus on maximizing shareholder value, and this goal was reinforced by compensating executives with stocks.4 However, these strategies have a number of flaws. They create a bias towards short-term results (such as quarterly earnings) at the expense of longer-term prioriti
... See moreFree-enterprise capitalism must be grounded in an ethical system based on value creation for all stakeholders. Money is one measure of value, but it is certainly not the only measure.
The realization that focusing only on profit-seeking practices had human costs that ultimately hindered corporate efficiency led to a notion of corporate responsibility.
The myth that profit maximization is the sole purpose of business has done enormous damage to the reputation of capitalism and the legitimacy of business in society. We need to recapture the narrative and restore it to its true essence: that the purpose of business is to improve our lives and to create value for stakeholders.