The New Economy Business Model and Sustainable Prosperity

Lazonick, William

doi:10.2139/ssrn.1134982

Cited by 9 publications

(11 citation statements)

References 43 publications

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“…Companies also report dividends paid as part of their financial statements. I combine two variables, corporate dividends and stock buybacks, into one metric called “shareholder payments.” Even though buybacks are more indirect forms of shareholder payment, since they accrue to share-sellers and not to all shareholders, they are an important use of corporate funds deployed in the pursuit of increasing shareholder wealth (Lazonick, 2014).…”

Section: Methodsmentioning

confidence: 99%

“…The rise of institutional investors and the economic stagnation of the 1970s, combined with the intellectual law-and-economics revolution, meant that in the 1980s, managers had to increasingly respond to financial market pressure to raise share prices (Lazonick & Shin, 2020). The transition from a managerial focus on “retain-and-reinvest” to “downsize-and-distribute” has contributed to the stagnation of wages for non-executive workers since the 1980s and widespread outsourcing and fissuring of the US workforce (Lazonick, 2014; Lazonick & Shin, 2020). Unsurprisingly, the shift in focus to maximizing shareholder wealth has meant a steady rise in shareholder payments, as will be discussed further in the next section.…”

Section: Section 2 the Racial Wealth Gap And Shareholder Primacymentioning

confidence: 99%

“…Generally, shareholder payments have been rising as a percentage of corporate assets since the 1980s, mainly driven by a rise in the practice of stock buybacks described above, which reached $6.3 trillion in the decade from 2010 to 2019 (Palladino, 2021b). Stock buybacks occur when publicly traded companies repurchase their own shares on the open market with the intent of raising existing share prices, protected from liability for market manipulation of their stock price by Securities and Exchange Commission Rule 10b-18 (Lazonick, 2014; Palladino, 2020). Stock buybacks account for an increasing portion of corporate profits: they averaged 50 percent of corporate profits from 2008 to 2017, and when combined with dividends, averaged 100 percent over the same time period (author's analysis, using S&P Compustat).…”

Section: Section 3 Shareholder Payments Accruing By Race and Ethnicitymentioning

confidence: 99%

“…A second set of policies that would move corporations away from shareholder primacy places limits on stock buybacks and executive compensation, and reforms tax policy. First, stock buybacks should be curbed or limited (Lazonick, 2014; Lazonick & O’Sullivan, 2000; Lazonick & Shin, 2020; Palladino, 2020, 2021b). Second, executive compensation should no longer be tied to short-term share prices—a practice that has given executives outsized personal interest in increasing shareholder wealth in the short-run at the expense of long-term corporate productivity and innovation (Lazonick, 2019).…”

Section: Section 5 Policy Recommendationsmentioning

confidence: 99%

“…This framework is contested as a correct understanding of corporate law and reflects a “market orthodoxy” view of the corporation as simply a nexus of contracts, rather than as a social institution (Admati, 2017). Scholars have explored the impact of shareholder primacy on corporate investment and the slowdown of the macroeconomy, as well as in terms of the income gap (Lazonick, 2014; Lin & Tomaskovic-Devey, 2013; Palladino, 2020, 2021b; Tulum & Lazonick, 2018). This article contributes both to the broader literature on financialization and shareholder primacy and to the literature on the racial wealth gap by examining the impact of shareholder primacy on the US racial wealth gap.…”

Section: Introductionmentioning

confidence: 99%

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The Contribution of Shareholder Primacy to the Racial Wealth Gap

Palladino

2022

The Review of Black Political Economy

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The US racial wealth gap is substantial and growing, stemming from a history of structural racism and the intergenerational transmission of wealth. This article investigates the role of corporate equity and mutual fund ownership on the racial wealth gap over time. 92.1 percent of US corporate equity and mutual fund value is owned by white households; Black households own 1.5 percent while Hispanic households own 1.9 percent. I use the Federal Reserve's Distributional Financial Accounts to determine the changing impact of the corporate equity gap on the racial wealth gap, and to measure how shareholder payments—dividends and stock buybacks—are divided by race and ethnicity. I find that total shareholder payments made to white households during that time frame totaled $13 trillion, while $181 billion went to Black households and $212 billion to Hispanic households. I then find that the proportion of the gap in corporate equity and mutual fund ownership to the overall racial wealth gap has grown over the past three decades, from 10 percent to 23 percent. This analysis contributes to policy discussions about ending shareholder primacy and wealth inequities that are a legacy of the US's history of slavery, racism, and xenophobia.

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Section: Methodsmentioning

confidence: 99%

Section: Section 2 the Racial Wealth Gap And Shareholder Primacymentioning

confidence: 99%

Section: Section 3 Shareholder Payments Accruing By Race and Ethnicitymentioning

confidence: 99%

Section: Section 5 Policy Recommendationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Contribution of Shareholder Primacy to the Racial Wealth Gap

Palladino

2022

The Review of Black Political Economy

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The Creation and Disruption of Innovation? Key Developments in Innovation as Concept, Theory, Research and Practice

Lester¹

2017

Innovation in the Asia Pacific

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Adoption of Open Business Models in the West and Innovation in India's Software Industry

Lema¹

2010

IDS Research Reports

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Summary Over the last three decades, outsourcing has had a big influence on the international division of labour. It is clear that it has been a major reason for the enormous build‐up of production capabilities in the developing world, in particular in the export platforms of Asia. However, the influence of outsourcing on innovation capabilities is less clear. Recent literature shows that innovation capabilities have emerged in the software cluster of Bangalore in India. This report asks whether and how the adoption of open business models in OECD countries had an influence on the rise of innovative software services in Bangalore. This requires detailed research on both the demand side and the supply side of outsourced software services. On the demand side, this report compares three software buyer segments, exploring the relationship between business models and outsourcing patterns. The study shows that the adoption of open business models in OECD countries has a major influence on the ‘space’ for innovation that accrues to suppliers in the software industry in India. On the supply side, the study investigates the factors that determine whether the new spaces are filled and how advanced innovation capabilities are built. The key feature of this study is that it examines the interaction between demand‐ and supply‐side dynamics. Most studies tend to focus on only one side, but the key is to see them in conjunction. The study shows that their co‐evolution over time changes not only the scale of outsourcing but also the ‘quality’ of the contents and the division of labour.

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The New Economy Business Model and Sustainable Prosperity

Cited by 9 publications

References 43 publications

The Contribution of Shareholder Primacy to the Racial Wealth Gap

The Contribution of Shareholder Primacy to the Racial Wealth Gap

The Creation and Disruption of Innovation? Key Developments in Innovation as Concept, Theory, Research and Practice

Adoption of Open Business Models in the West and Innovation in India's Software Industry

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