Abstract

According to one prominent view of rationality, for the choice of alternative to be justified, it must be at least as good as other alternatives. Michael Jensen has recently invoked this view to argue that managers should act exclusively to maximize the long-run market value of economic enterprises. According to Jensen, alternative accounts of managerial responsibility, such as stakeholder theory, are to be rejected because they lack a single measure to compare alternatives as better or worse. Against Jensen’s account, this paper argues that choosing the alternative that is at least as good as other alternatives need not preclude managers from respecting considerations in addition to long-run market value. The paper argues that such considerations may be incorporated into managerial decision-making by introducing constraints and priorities into the process of maximizing long-run market value and by allowing for “clumpy” values.