The decade-long boom in the US stock market and the more recent boom in the US economy have fostered widespread belief in the economic bene ts of the maximization of shareholder value as a principle of corporate governance. In this paper, we provide an historical analysis of the rise of shareholder value as a principle of corporate governance in the United States, tracing the transformation of US corporate strategy from an orientation towards retention of corporate earnings and reinvestment in corporate growth through the 1970s to one of downsizing of corporate labour forces and distribution of corporate earnings to shareholders over the past two decades. We then consider the recent performance of the US economy, and raise questions about the relation between the maximization of shareholder value and the sustainability of economic prosperity.

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Contemporary research on comparative corporate governance was initially preoccupied with the question of differences in national systems of corporate governance. In recent years, however, the focus has shifted to change as some scholars argue that there are growing pressures on national systems of corporate governance to converge on a model that supports an increased focus on shareholder value, that is, a model that closely resembles the US system of corporate governance. In opposition to this view, others predict that systems of corporate governance around the world will continue to diverge. Drawing on the examples of France and Germany I show that considerable change has indeed occurred in national governance systems. Particularly important has been the growing influence of the stock market. Existing theories are inadequate for understanding the political economy of the changes that have taken place in the French and German systems of corporate governance as well as the likelihood that they will continue to evolve in the direction of shareholder value. To support this claim I focus on a common, and fundamental, deficiency in all of the theoretical approaches to the subject, that is, the weakness in their analysis of the relationship between the changing role of the stock market and the productive capabilities of particular national economies.

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