Is Maximizing Returns to Shareholders a Legitimate Mandate?: Number 1 in the Beyond the Bottom Line Series

by Marjorie Kelly

Summary Public corporations focus all their energy on maximizing returns to stockholders, often at the expense of employees, communities, even the environment. But as Marjorie Kelly ably demonstrates, there's no rational reason to do so. It's a form of discrimination based on property. It's aristocratic. And its out-of-step with both democratic and free market ideals. ------------------------------------------------------------------------ Description They contribute nothing, but they must be allotted a share of what’s produced--it’s the law . In fact, the whole system is set up for their benefit. The more they get, the better the system is "working". They have no responsibilities other than to sit back and collect their cut. Those actually responsible for production are considered transferable assets, at best--more often mere expenses to be minimized as much as possible. They’re not the medieval aristocracy. Nor are they the pre-Revolution ancien regime, or ante-bellum plantation owners. They’re corporate shareholders. In this provocative new publication, Marjorie Kelly, founder and publisher of Business Ethics magazine, argues that modern business’s focus on maximizing shareholder return is fundamentally flawed. Corporations favor stockholders when there’s no rational reason to do so. The overwhelming majority of stock purchases contribute nothing to the corporation’s top or bottom line, nor do shareholders contribute anything else. And corporate obsession with shareholder return often comes at the expense of concerns about employee or community welfare. Kelly sees this obsession with shareholder return as the core problem of modern capitalism, the root cause of such phenomena as bloated CEO pay, sweatshops, speculative excesses and stagnant wages. In major public corporations this obsession amounts to property bias, which is akin to racial or gender bias. "Civilization has crossed a great divide, from monarchy to democracy", Kelly says. "But we have democratized only government, not economics. Property bias keeps our corporate worldview rooted in the pre-democratic age. To change this, we begin by seeing it." "With this fascinating and iconoclastic 54-page booklet Marjorie Kelly opens our eyes to an unexamined vestige of aristocratic thinking which is exerting a profoundly negative impact on modern society. This booklet is part one of a four-part work-in-progress by Marjorie Kelly entitled The Divine Right of Capital, which will further detail how the corporate mandate to maximize return to shareholders is out of step with democratic ideals. This booklet is also the first in the Beyond the Bottom Line series. Six times a year Beyond the Bottom Line publishes provocative, thought-provoking, often controversial booklets by some of the most original thinkers of our times--essays that challenge conventional economic thinking and point the way to a more humane, enlightened world of work.

56 pages, Paperback

First published November 1, 1999