17 Facts About Shareholder value

Shareholder value is a business term, sometimes phrased as shareholder value maximization.

Management consulting firms Stern Stewart, Marakon Associates, and Alcar pioneered Shareholder value-based management, or "managing for Shareholder value", in the 1980s based on the academic work of Joel Stern, Dr Bill Alberts, and Professor Alfred Rappaport.

Lastly, the shareholder value theory seeks to reform the governance of publicly owned firms in order to decrease the principal-agent information gap.

Concept of maximizing shareholder value is usually highlighted in opposition to alleged examples of CEO's and other management actions which enrich themselves at the expense of shareholders.

Sole concentration on shareholder value has been widely criticized, particularly after the late-2000s financial crisis.

Shareholder value coupled with short-termism has been criticized as lowering the overall rate of economic growth due to reduced business capital accumulation.

Additionally, short term focus on shareholder value can be detrimental to long term shareholder value; the expense of gimmicks that briefly boost a stocks value can have negative impacts on its long term value.

In Milton Friedman's seminal piece advocating for shareholder value titled “The Social Responsibility of Business Is to Increase Its Profits” makes the argument that the business of business is its business.

Anthropologist Karen Ho argues that the concept of shareholders and subsequently shareholder value was developed primarily for the purpose of shoehorning the insertion of the corporation into the neoclassical economic model, and ignores that the neoclassical model, which was originally created in eighteenth and nineteenth century prior to the proliferation of corporate organization, was never designed to operate with number of inputs the modern corporation requires.

Common critique of shareholder value is the mystification surrounding its legal validity.

Yet, none of these are rooted in any law because shareholder value is ultimately a management decision, not a legal requirement.

Short-term nature of shareholder value theory is one of the features focused on by critics.

Business experts have criticized shareholder value for failing to materialize economic growth and increased productivity.

Shareholder value can have a negative effect on employee morale as the entire mission of the corporation becomes the generation of wealth for shareholders.

Broad idea of "stakeholder Shareholder value" is the most common basis of alternative frameworks.

Stakeholder Shareholder value heavily relies on corporate social responsibility and long-term financial stability as a core business strategy.

Stakeholder Shareholder value model is prevalent in regions where limited liability laws are not strong.