Business Ethics Quarterly 23 (2):207-238 (2013)

Abstract
Many scholars and managers endorse the idea that the primary purpose of the firm is to make money for its owners. This shareholder wealth maximization objective is justified on the grounds that it maximizes social welfare. In this article, the first of a two-part set, we argue that, although this shareholder primacy model may have been appropriate in an earlier era, it no longer is, given our current state of economic and social affairs. To make our case, we employ a utilitarian moral standard and examine the apparent logical sequence behind the link between shareholder wealth maximization and social welfare. Upon close empirical and conceptual scrutiny, we find that utilitarian criteria do not support the shareholder model; that is, shareholder wealth maximization is only weakly linked to social welfare maximization. In view of the dubious validity of this sequential argument, we outline some of the features of a superior corporate objective—a variant of normative stakeholder theory. In the second article, we will advance and defend our preferred alternative and then discuss some institutional arrangements under which it could be implemented.
Keywords Applied Philosophy  Business and Professional Ethics  Social Science
Categories (categorize this paper)
ISBN(s) 1052-150X
DOI beq201323215
Options
Edit this record
Mark as duplicate
Export citation
Find it on Scholar
Request removal from index
Revision history

Download options

PhilArchive copy


Upload a copy of this paper     Check publisher's policy     Papers currently archived: 60,901
Through your library

References found in this work BETA

Capitalism and Freedom.Milton Friedman - 1962 - Ethics 74 (1):70-72.
Stakeholder Theory and A Principle of Fairness.Robert A. Phillips - 1997 - Business Ethics Quarterly 7 (1):51-66.

View all 30 references / Add more references

Citations of this work BETA

Efficiency and Ethically Responsible Management.Jeffery Smith - 2018 - Journal of Business Ethics 150 (3):603-618.
Shareholder Primacy and Deontology.Hasko von Kriegstein - 2015 - Business and Society Review 120 (3):465-490.

View all 23 citations / Add more citations

Similar books and articles

A Moral and Economic Defense of Executive Compensation.John Dobson - 2011 - Business and Professional Ethics Journal 30 (1-2):59-70.
Ethical Aspects of Investor Behavior.Pietra Rivoli - 1995 - Journal of Business Ethics 14 (4):265 - 277.
Ethical Transparency and Economic Medicalization.Geoffrey Poitras & Lindsay Meredith - 2009 - Journal of Business Ethics 86 (3):313-325.
Adjudication.Ben Eggleston - 2013 - In James E. Crimmins (ed.), The Bloomsbury Encyclopedia of Utilitarianism. Bloomsbury Publishing. pp. 6-8.
Contemporaneous Relationship Between Eva and Shareholder Value.Wajeeh Elali - 2006 - International Journal of Business Governance and Ethics 2 (s 3-4):237-253.
Tinged Shareholder Theory: Or What's so Special About Stakeholders?Geoff Moore - 1999 - Business Ethics, the Environment and Responsibility 8 (2):117–127.
Shareholder Activism: A Multidisciplinary View.Maria Goranova & Lori Verstegen Ryan - 2012 - Proceedings of the International Association for Business and Society 23:160-169.
Balancing Ethics and Shareholder Returns: The Case of Google in China.Dennis Proffitt - 2011 - Journal of Business Ethics Education 8 (1):181-198.
Shareholder Activism.Maria Goranova & Lori Verstegen Ryan - 2012 - Proceedings of the International Association for Business and Society 23:160-169.

Analytics

Added to PP index
2013-06-12

Total views
85 ( #123,083 of 2,439,023 )

Recent downloads (6 months)
5 ( #136,334 of 2,439,023 )

How can I increase my downloads?

Downloads

My notes