The Shareholder Value Myth How Putting Shareholders First Harms Investors, Corporations, and the Public

Executives, investors, and the business press routinely chant the mantra that corporations are "owned by shareholders" and managers are obliged to "maximize shareholder value." The results have been disastrous. "Shareholder primacy" thinking causes corporate managers to focus myopically on short-term earnings reports at the expense of long-term performance; discourages investment and innovation; harms employees, customers, and communities; and causes companies to indulge in reckless, sociopathic, and socially irresponsible behaviors. In this powerful new book, distinguished legal scholar Lynn Stout proves that there is in fact absolutely no legal obligation for corporations to maximize shareholder value-people just assumed there was. Nor, she demonstrates, is it the optimal economic model-that's just another unproven assumption. And in fact, it is not the best model: Stout presents empirical evidence which shows that companies that put share value first do not outperform companies that emphasize it less. Shareholder primacy actually hurts individual investors by obscuring their specific, diverse interests in the name of serving a hypothetical, homogeneous, abstract shareholder. Stout looks at new theories that not only better serve the needs of real human beings who invest, but of corporations and society as well.

Lynn Stout is the Distinguished Professor of Corporate and Business Law, Clarke Business Law Institute, at Cornell Law School. Her work on corporate theory was cited by Supreme Court Justice John Paul Stevens in his dissent in Citizens United.

Preface
INTRODUCTION: “THE DUMBEST IDEA IN THE WORLD”

PART I: DEBUNKING THE SHAREHOLDER VALUE MYTH
Chapter One The Rise of Shareholder Value Thinking
Chapter Two How Shareholder Primacy Gets Corporate Law Wrong
Chapter Three How Shareholder Primacy Gets Corporate Economics Wrong
Chapter Four How Shareholder Primacy Gets the Empirical Evidence Wrong

PART II: WHAT DO SHAREHOLDERS REALLY VALUE?
Chapter Five Short-term Speculators versus Long-term Investors
Chapter Six Keeping Promises To Build Successful Corporations
Chapter Seven Hedge Funds versus Universal Investors
Chapter Eight Making Room for Shareholder Conscience
CONCLUSION: SLAVES OF SOME DEFUNCT ECONOMIST
Notes
Index
About the Author