> Minimizing shareholder value will flatten the economy.
Will it though? I'm curious what the empirical basis is for this causal claim, especially given that it ignores the wealth of gray area in between these two extremes. (That goes notwithstanding that I have zero idea what is meant by either "minimizing shareholder value" or how a flattened economy could look as an operationalized outcome. Neither of these are accepted terms of art with precise definitions.)
There are some obvious counterexamples to look at, wherein a hypothetical firm doesn't intentionally maximize shareholder value or chooses explicitly not to:
- A firm can choose to pursue long-term productivity gains;
- A firm can pay higher wages or provide better working conditions and still generate substantial shareholder gains;
- A firm can keep its earnings rather than pay dividends to have cash on hand for capital improvements; or
- A firm can accept a haircut on its margins to expand along some axis, like manufacturing capacity or market share.
Shareholder value is usually taken to be a function of the firm's expected future cash on hand (or, more precisely, the equity claims on that expected future cash on hand) and its exposures to various risks to that cash on hand (optionally quantified by people like me!), and the idea of maximizing shareholder value needs to be understood as having some kind of time horizon. Commonly, in the post-Jack Welch era, this time horizon is three months.
On a much longer time horizon, however, sacrificing short-term shareholder gains for long-term productive capacity can very well be analyzed as shareholder value maximization.
> Do you really want to live in a pre-industrial agrarian society?
This seems to treat the grandparent post's social insurance and institutional design argument that shareholder primacy has contributed to the institutional arrangement that makes intergenerational care difficult as though it means, what, capitalism is bad, so we should return to farming.
I'm unsure that I can draw a comparison between these two arguments. They're very different, and the parent post's reply doesn't establish the premise it needs. Industrialization and shareholder primacy aren't binary choices, and the mere existence of modern industrial prosperity doesn't establish the fact that our particular institutional arrangement producing it is in fact necessary for that prosperity.
Will it though? I'm curious what the empirical basis is for this causal claim, especially given that it ignores the wealth of gray area in between these two extremes. (That goes notwithstanding that I have zero idea what is meant by either "minimizing shareholder value" or how a flattened economy could look as an operationalized outcome. Neither of these are accepted terms of art with precise definitions.)
There are some obvious counterexamples to look at, wherein a hypothetical firm doesn't intentionally maximize shareholder value or chooses explicitly not to:
- A firm can choose to pursue long-term productivity gains;
- A firm can pay higher wages or provide better working conditions and still generate substantial shareholder gains;
- A firm can keep its earnings rather than pay dividends to have cash on hand for capital improvements; or
- A firm can accept a haircut on its margins to expand along some axis, like manufacturing capacity or market share.
Shareholder value is usually taken to be a function of the firm's expected future cash on hand (or, more precisely, the equity claims on that expected future cash on hand) and its exposures to various risks to that cash on hand (optionally quantified by people like me!), and the idea of maximizing shareholder value needs to be understood as having some kind of time horizon. Commonly, in the post-Jack Welch era, this time horizon is three months.
On a much longer time horizon, however, sacrificing short-term shareholder gains for long-term productive capacity can very well be analyzed as shareholder value maximization.
> Do you really want to live in a pre-industrial agrarian society?
This seems to treat the grandparent post's social insurance and institutional design argument that shareholder primacy has contributed to the institutional arrangement that makes intergenerational care difficult as though it means, what, capitalism is bad, so we should return to farming.
I'm unsure that I can draw a comparison between these two arguments. They're very different, and the parent post's reply doesn't establish the premise it needs. Industrialization and shareholder primacy aren't binary choices, and the mere existence of modern industrial prosperity doesn't establish the fact that our particular institutional arrangement producing it is in fact necessary for that prosperity.