Abstract
The neoclassical paradigm assumes that shareholders' utility is solely a function of their wealth, and prescribes that management should act in a manner consistent with share price maximization. The stakeholder view also assumes that shareholders' utility derives from wealth, but prescribes that managers must balance the shareholder wealth maximization objective against the rights of other constituencies. Thus, while neoclassicists and stakeholder theorists have different prescriptives for management behavior, their definitions of the shareholders' interest are consistent — shareholders are self-interested economic agents whose utility is best served by share price maximization. However, if shareholders are “other-interested,” and attack importance to ethical and moral values, then both the neoclassical and stakeholder view derive from invalid assumptions. In this paper, I present evidence that much shareholder behavior is ethically motivated. As a result, the basis for both the neoclassical and the stakeholder view are weakened.
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Pietra Rivoli is an Associate Professor of Finance at the Georgetown University School of Business and a Visiting Lecturer at University College Dublin. Her interests are in the areas of corporate and international finance. Her work has been published inFinancial Management and theFinancial Review. She is also a coauthor ofInternational Business (Dryden Press, 1992).
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Rivoli, P. Ethical aspects of investor behavior. J Bus Ethics 14, 265–277 (1995). https://doi.org/10.1007/BF00871897
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DOI: https://doi.org/10.1007/BF00871897