Companies run in shareholders’ long-term interests also serve society’s long-term interests*

Abstract

The reality of Anglo-American shareholder capitalism is that public corporations are no longer run primarily in the long-term interests of the shareholders. Most of the effective powers of shareholders over the last 40 to 50 years have unconsciously and unintentionally been relinquished to corporate managements. They have been able to maximise their own rewards, usually short-term ones, without delivering optimal long-term performance. This chapter shows how this has come about; discusses how it can be remedied; and considers its relevance to corporate social responsibility (CSR). It contends that companies run in the long-term interests of shareholders also meet society's reasonable long-term goals and thus the reasonable aims of CSR. The chapter is devoted to what is involved in understanding and achieving effective long-term corporate ownership. Effective capitalism requires that corporate managements have wide executive powers and incentives to develop and execute strategies in the long-term interests of shareholders.