Helping Finance Students Think About the Shareholder Value Maximization Objective

Abstract

One of the most contentious debates in the field of financial management involves the relative merits of a “shareholder”versus a “stakeholder” focus. While there are often-overlooked common elements in the “shareholder” and “stakeholder”arguments, clearly there are sharp differences between the two as well. Business school professors have the often-difficult taskof describing these differences for their students. This paper describes possible approaches to this issue, both at a surface levelfor an introductory finance course, and in a more applied manner for an advanced course.
 The author proposes an approach of enlightened self-interest, in which corporate management observes its fiduciaryresponsibility to shareholders by pursuing long-term shareholder value maximization, and at the same time realizes that thispursuit is likely to be fruitless if other constituencies are neglected. However, it is hoped that the teaching suggestions offered inthis paper will be helpful, both to those who agree with this approach, and to those who hold a different view.