A Critique of Shareholder Value
The Cournot Centre series
6. The logics of ﬁnance The preceding chapters have shown how businesses have become dependent on ﬁnance. An obsession with stock market price has become a determining feature of capitalism in the last decade of the twentieth century. Financial liberalization has increased the depth and liquidity of capital markets. With the rise to power of institutional investors has come increased awareness of the shareholder. Chapter 4 underlined the way in which the diﬀerent actors of ﬁnance inﬂuence the objectives of corporate executives and the way in which they conduct strategy. These cross-inﬂuences tend to yield to shareholder value, which has multiple ingredients: threats of hostile takeovers, introduction of new management tools, mainstreaming of stock options, diﬀusion of a rhetoric associating business eﬃciency and shareholder well-being, and so on. As yet, this analysis is incomplete: the 1990s were also a period of ﬁnancial eﬀervescence which accompanied serious distortions of corporate governance. External growth frenzy, hopes of immeasurable proﬁts, and immoderate recourse to debt leverage, were very widespread. At the turn of the twenty-ﬁrst century, these ﬁnancial excesses came undone in a double crisis: a ﬁnancial crisis unleashed by a stock market collapse, and a crisis of governance founded on shareholder value, initiated by the bankruptcy of Enron. In this book, emphasis has been placed on the dual character of the crisis of the principle of shareholder value, which claims to govern contemporary capitalism. The quasi-totality of current explanations of these phenomena separates them...
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