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 9: In Favour of Economic Democracy

Michel Aglietta and Antoine Rebérioux


Our analysis of contemporary, finance-dominated capitalism has four results. The first concerns the firm. In its technical, financial, cognitive, and organizational aspects, the development of capitalism has reinforced its collective nature. The firm is a place of both cooperation, which underlies production, and conflicts of power; it is driven by interests that cannot be dissociated, but which are in part contradictory. In that respect, businesses are partnerships by their very nature. Therefore, the first concern of governance is not control, but the formation of a collective interest, a goal recognized and accepted by the company’s stakeholders. The second result concerns finance. The last 30 years have seen a major evolution from intermediary finance towards market finance. This evolution signifies a paradigm shift in risk assessment and management. The digital revolution allowed risk to be broken down into basic elements, arranged into tradable financial products and transferred to all financial institutions. The consequences of this revolution are far-reaching, yet ambivalent. This is not a linear evolution toward a utopia of perfect market systems. There are multiple possibilities for risk diversification, but risk transfer creates interdependencies that provoke destabilizing feedback when macroeconomic problems arise. Available funds increase, but the strong link between indebtedness and the valuation of equity capital leads to financial fragility. Reorganization of financial portfolios seems limitless thanks to market liquidity. Liquidity, however, depends on the intersubjectivity between agents, which is affected by fluctuations in trust. The final result is a finance that is more unstable,...

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