There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules… This cost is measurable only if we decide what the result would be had the firm attempted to maximize value to shareholder. Under this legal regime, it is not malfeasance for boards or corporate chiefs to make decisions that do not maximize shareholder value. Maximizing shareholder value, subsequently, is a consistent example for how a firm should act. When shareholder value … While the duty to maximize shareholder value may be a useful shorthand for a corporate manager to think about how to act on a day to day basis, this is not legally required or enforceable …. The first believes the company’s goal is to maximize shareholder value. Maximizing shareholder value is a highly useful but imperfect approach to managing a corporation. Ford Motor, which, at face value, is a lawsuit brought by shareholders against corporate leadership for charitable giving as opposed to maximizing shareholder profits, and where the court said that a business is operated for the profits of the shareholders. And while this is a generally useful idea it does not mean that all facets of it are beneficial. The U.S. economy will not work again for the American people until they tear down that edifice. In 1975, it helped defeat anti-trust legislation. Examples include antitrust laws to limit exploitation of product market power, anti-monopsony rules to enhance competition for employees, and corporate tax policy to affect levels of corporate profitability, location decisions, wages paid to workers, or incentives to invest. Most are formed “to conduct or promote any lawful business or purposes.” – Shareholders are neither owners, nor principals, nor residual claimants. At its core the concept of maximizing shareholder value is perfectly consistent with providing value to customers. A Duty to Shareholder Value Stephen Bainbridge , the William D. Warren distinguished professor of law at U.C.L.A. Shareholder value is what is delivered to equity owners of a corporation because of management's ability to increase earnings, dividends, and share prices. There is a fiduciary duty that the board has to maximize the shareholder's profits.

Where this comes into play is shareholder derivative law suits where the board takes an action that fails to do this. When management does not follow these guides, we must recognize this as a restriction and make decision for the opportunity cost. However, let me repeat at face value. It also laid the intellectual foundations for the “shareholder value” revolution of the 1980s. Maximizing shareholder value, they write, is “flawed in its assumptions, confused as a matter of law, and damaging in practice.” Bower has long held this view.

Maximizing Shareholder Value . Increasing shareholder value increases the total amount in the stockholders' equity section of the balance sheet. The BRT has a long track record of defending business against the wider interests of society. Since then, Friedman’s view that the sole social responsibility of the firm is to maximize profits—leaving ethical questions to individuals and governments—has become dominant in both finance and law. In 1975, it helped defeat anti-trust legislation. – U.S. corporate law does not, and never has, required directors of public corporations to maximize shareholder value.


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