The Limits of Shareholder Value

The Common Good of Business: Addressing a Challenge Posed by «Caritas in Veritate»

“…The traditional paradigm that assumes that the main goal of business is to maximize profit (Friedman 1970;Jensen and Meckling 1976;Sundaram and Inkpen 2004) has been revisited and questioned from different angles (Drucker 1955;Fama 1980;Duska 1997;Koslowski 2000;Kennedy 2000;Abela 2001;Handy 2002;Freeman et al 2004;Ghoshal 2005;Fontrodona and Sison 2006). Furthermore, a request for a new way of understanding business implies rethinking not only the purpose of the firm, but also how business contributes to the common good of the society in which it operates.…”

Is there a morally right price for anti-retroviral drugs in the developing world?

“…Similarly Koslowski (2000) argued that shareholder value is not the final purpose of the firm but an instrumental end. If the firm is to pursue its many legitimate purposes, such as making products, offering employment and contributing to the community, then a sufficient return on equity is a necessary condition.…”

Corporate purpose in a small post-transitional economy: the case of Slovenia

“…In the decision-making process firms can rely on the reasoning of Moran and Ghoshal (1996), who claimed that things that are beneficial for society are not necessary bad for the firm, and what is good for the firm is not necessary a cost to society. Koslowski (2000) showed that shareholder value can be used as a principle of management control, but not as the firm's objective. According to the author, the idea that the shareholder value maximisation is the firm's only objective is a mistaken legacy of a transfer from a financial to an industrial firm.…”

“…For other groups, this objective is just a precondition that enables the success of the firm as a whole. Following this, Koslowski (2000) suggested that the main purpose why a company has been established should be the production of goods and services, and not the production of profits or shareholder wealth. However, this may only be accomplished if adequate return on investments is realised.…”