Abstract
Shareholder value orientation has been introduced as a means to improve the performance of the corporation. The paper investigates the theoretical justification for the claim that increasing shareholder value is the purpose of corporate governance. It demonstrates that shareholder value is the control principle, not the purpose of the firm. The idea that shareholder value is the only goal of the corporation is a mistaken transfer from the financial to the industrial firm. The paper also questions that the merger of manager interests and owner interests introduced by the remuneration of managers by stock options improves the management performance. The self- apportioning of stock options by the management is in danger of becoming a form of insider trading.
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A. A. Alchian and H. Demsetz: 1977, ‘Production, Information Costs, and Economic Organization’, in A. A. Alchian, Economic Forces at Work (Liberty Press, Indianapolis), pp. 73–110.
This point is also stressed in Lee A. Tavis: ‘The Moral Issue in Allocating Corporate Resources. Shareholders Versus Stakeholders’, in M. Naughton (ed.), The Nature and Purpose of the Business Organization within Catholic Social Thought, forthcoming.
Luis de Molina: 1602, De iustitia et iure (Madrid). — Cf. P. Koslowski: 1982, 6th ed. 1998, Ethik des Kapitalismus (Mohr Siebeck, Tübingen). English translation: 1996, Ethics of Capitalism and Critique of Sociobiology. Two Essays with a Comment by James M. Buchanan (Springer, Berlin, New York, Tokyo).
Gustav Radbruch: 8th ed. 1973, Rechtsphilosophie (Philosophy of Right) (Koehler, Stuttgart), p. 114.
R. E. Freeman: 1984, Strategic Management: A Stakeholder Approach (Pitman, Boston), and R. E. Freeman: 1994, ‘The Politics of Stakeholder Theory: Some Future Directions’, Business Ethics Quaterly 4, 413ff. — Compare also David W. Lutz: 1998, ‘Kritik des Shareholder-Ansatzes und des Stakeholder-Ansatzes’ (Critique of the Shareholder Approach and of the Stakeholder Approach), in P. Koslowski (ed.), Shareholder Value und die Kriterien des Unternehmens erfolgs (Shareholder Value and the Criteria of the Success of the Firm) (Physica, Heidelberg), pp. 187–200.
M. C. Jensen and W. H. Meckling: 1979, ‘The Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure’, in K. Brunner (ed.), Economics and Social Institutions (Martinus Nijhoff, Boston), pp. 163–231.
Cf. P. Koslowski: 1997, Ethik der Banken und der Börse (The Ethics of Banking and the Stock Exchange) (Mohr Siebeck, Tübingen). Abridged English version: P. Koslowski: 1995, ‘The Ethics of Banking’, in A. Argandoña (ed.), The Ethical Dimension of Financial Institutions and Markets (Springer, Berlin, New York, Tokyo).
Cf. for this principle G. Schmollen 1881, ‘Die Gerechtigkeit in der Volkswirthschaft’ (Justice in the Economy), Jahrbücher für Gesetzgebung, Verwaltung und Volkswirthschaft im Deutschen Reich 5, 19–54.—Cf. for the Historical School of economics P. Koslowski: 1991, Gesellschaftliche Koordination. Eine Theorie der Marktwirtschaft (Societal Coordination. A Theory of the Market Economy) (Mohr Siebeck, Tübingen); P. Koslowski (ed.): 1995, reprinted 1997, The Theory of Ethical Economy in the Historical School. Wilhelm Röscher, Lorenz von Stein, Gustav Schmoller, Wilhelm Dilthey and Contemporary Theory (Springer, Berlin, New York, Tokyo); and P. Koslowski (ed.): 1997, Methodology of the Social Sciences, Ethics, and Economics in the Newer Historical School. From Max Weber and Rickert to Sombart and Rothacker (Springer, Berlin, New York, Tokyo).
Cf. ‘Niederlage für Daimler-Kritiker Wenger’ (Defeat for Daimler’s critic Wenger), in Süddeutsche Zeitung 185, 13 August 1998, p. 17, as well as ‘Wenger unterliegt Daimler’ and comment by Mathias Philip: ‘Aktienoptionen’ (Share Options), in Hannoversche Allgemeine Zeitung, Hannover, 188, 13 August 1998, p. 9. The comment takes position for Wenger against Daimler-Benz. See also Frankfurter Allgemeine Zeitung of the same day.
Cf. “Ich besitze keine einzige Porsche-Aktie’ Der Manager hält wenig von Aktienoptionen zur Steigerung des Firmenwertes’ (‘I do not own a single Porsche share’ The manager does not believe in share options as a means to increase the firm’s value), in Süddeutsche Zeitung, München, 4120 February 2000, p. 28.
A. Rappaport: 1986, Creating Shareholder Value. The New Standard for Business Performance (The Free Press, New York), pp. 25ff.
Cf. Günter H. Roth: 1988, ‘Shareholder Value und Dividendenausschüttung’ (Shareholder Value and Paying-off Dividends), in P. Koslowski (ed.), Shareholder Value und die Kriterien des Unternehmenserfolgs, op. cit.
Cf. Martin Luther, De servo arbitrio.
S. Freud: 1900, Die Traumdeutung (The Interpretation of Dreams) (S. Fischer, Frankfurt am Main) 1982.
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Koslowski, P. (2000). The Limits of Shareholder Value. In: Sójka, J., Wempe, J. (eds) Business Challenging Business Ethics: New Instruments for Coping with Diversity in International Business. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-4311-0_14
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DOI: https://doi.org/10.1007/978-94-011-4311-0_14
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