Business Ethics Journal Review 7 (6):34-39 (2019)

Kenneth Silver
Trinity College, Dublin
Shareholders assume risk by investing. Sollars and Tuluca (2018) argue that while this does not justify a managerial policy of shareholder wealth maximization, it does justify compensating shareholders at the oftencalculated cost of equity—the cost that investors require given the level of risk they assume. Here, I show that this can be unfair if the cost of equity is unfair. I then show how shareholder wealth maximization as a managerial imperative is better justified on other grounds.
Keywords business ethics  shareholder primacy  stakeholder theory  Modern Portfolio Theory  Capital Asset Pricing Model
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DOI 10.12747/bejr2019.07.06
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