Corporate Governance Adrift
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Corporate Governance Adrift

A Critique of Shareholder Value

Michel Aglietta and Antoine Rebérioux

Recent corporate governance scandals have brought to the fore the inherent contradictions of a capitalism dominated by financial markets. This challenging book by Michel Aglietta and Antoine Rebérioux argues that capitalism’s basic premise – that companies must be managed in the sole interest of their shareholders – is incongruent with the current environment of liquid markets, profit-hungry investors and chronic financial instability. The authors advocate rather that a company should be managed as an institution where common objectives are developed for all stakeholders, and that this democratic principle should be extended to the management of collective savings to reduce macro-financial instability. These two conditions, they contend, could make contemporary capitalism a vehicle for social progress.
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Chapter 6: The Logics of Finance

Michel Aglietta and Antoine Rebérioux


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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