The dark side of shareholder orientation: A reflection of Rappaport's concept of shareholder value

Abstract

The concept of shareholder value has been the subject of heated debate for 40 years. Surprisingly, the literature seems to overlook the fact that shareholder orientation by management is something completely different from the implementation of this idea in the well‐known shareholder value concept, which aims to measure the contribution of management to shareholder welfare. Using a market‐oriented framework, this study shows that the fundamental orientation of shareholders' subjective preferences is supported by a property rights perspective inspired by the ideas of the Austrian School of Economics. In contrast, Alfred Rappaport's shareholder value concept is based on neoclassical equilibrium thinking and, therefore, counteracts the real, imperfect environment of the corporation's decision‐makers, especially their subjective values. This results from individual preferences and decision parameters, as well as incomplete and asymmetric information. Thus, it ignores the reality of managerial decision‐making. Based on these considerations, we argue that the advocacy of a general managerial orientation toward shareholders' objectives does not logically imply full support for the implementation of the idea under Rappaport's concept. In doing so, this essay contributes to a more differentiated discussion on valuation, corporate governance, and managerial decisions.

Learning from corporate governance: First conceptualization of a liability for political decision‐making

“…Such norms also play a role in corporations. For example, in the field of business economics, especially in the German-speaking world, we know the image of an honorable merchant (ehrbarer Kaufmann, e.g., Albach, 2003Albach, , 2005, for whom it is important to build up a reputation and to behave in a contractually faithful manner toward customers, employees, and suppliers, that is, all those persons to whom the honorable merchant makes promises (e.g., Follert et al, 2023). These norms can also have an important binding effect in the political arena.…”

“…Another explanation for the absence of political actors' liability in contrast to corporate managers could be that the target function of a manager can be more clearly defined (e.g., by financial parameters, see Follert et al, 2023) than the objectives of a politician. This is correct and is the main reason why corporate liability cannot simply be transferred to the political process and why a deeper discussion of the requirements is necessary.…”

Microaggressions, cancel culture, safe spaces, and academic freedom: A private property rights argumentation

“…Cancel culture, which is aimed at publicly denouncing real or assumed political and moral misconduct, currently occurs mainly in the context of social media and is also discussed and analyzed in this context (Clark, 2020;Follert et al, 2023;Follert & Daumann, 2021;Saint-Louis, 2021;Teixeira da Silva, 2021). In social media, the phenomenon consists of the collective mobilization of online communities or social media platforms to "cancel" or call out individuals who are perceived to have committed offenses, often related to issues of social justice, discrimination, or morality.…”

“…In the case of conflicting interests, obviously, not every party can be satisfied. However, with regard to the initial function of equity, the company owner can be interpreted as the ultimate decision-maker (e.g., Follert et al, 2023). Our review contributes, on the one hand, to the economic analysis of science and, on the other hand, to the ethical study of new phenomena in modern societies.…”