Abstract
Shareholder value has driven corporate governance in North America for over a century. In the wake of significant financial crises and growing inequalities, corporate America decided in 2019 to embrace a more egalitarian model, in which all stakeholders matter equally. The brutal pandemic that wreaked havoc in the first half of 2020 exposed a startling disconnect between the real economy and the stock market. This disconnect is due to a gap between explicit and implicit corporate governance. While officially corporate America wants to convert to a new doctrine, the pandemic has shown that shareholder capitalism has remained the default model. Good intentions and official declarations are not enough in a system that has been specifically designed to serve the shareholders. If stakeholder capitalism is to succeed, it needs a clear normative content and perhaps a more radical reform of institutions and regulation.
Highlights
Shareholder value has driven corporate governance in North America for over a century
Shareholder value has underpinned the current model of corporate governance for almost a century
The stakeholders identified in the report are: customers, employees, suppliers, local communities, and lastly, shareholders. It is not clear if this change of heart was prompted by the concern that shareholder capitalism is prone to devastating financial crises, or by moral concerns stemming from growing inequalities
Summary
For more than half century of “Greed is good,” the North-American version of shareholder capitalism (aka shareholder value, or shareholder primacy) has delivered solid economic growth and prosperity. After years of edging closer to espousing a more socially responsible model of governance, corporate America decided in 2019 to officially embrace managing for all stakeholders, signaling a major shift in the core capitalist doctrine In retrospect, it was a poor timing because a few months later, a world pandemic exposed the reallife challenges of this ideological conversion. SYMPHONYA Emerging Issues in Management, 2, 2021 symphonya.unicusano.it stock markets plunged along with the economy but reversed course and started a spectacular recovery well into the beginning of August, when they erased almost all the losses incurred a few months earlier This staggering comeback flies in the face of major economic indicators, such as GDP, unemployment, and industrial production, still reeling from the shock and still facing a very uncertain future. The current situation is somewhat reminiscent of the challenge faced some thirty years ago by Mikhail Gorbachev’s glasnost and perestroika, but this time in reverse
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