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Maximizing shareholder value: a new ideology for corporate governance
William Lazonick, Mary O'Sullivan
Abstract:
The decade-long boom in the US stock market and the more recent boom in the US economy have fostered widespread belief in the economic benefits of the maximization of shareholder value as a principle of corporate governance. In this paper, we provide an historical analysis of the rise of shareholder value as a principle of corporate governance in the United States, tracing the transformation of US corporate strategy from an orientation towards retention of corporate earnings and reinvestment in corporate growth through the 1970s to one of downsizing of corporate labour forces and distribution of corporate earnings to shareholders over the past two decades. We then consider the recent performance of the US economy, and raise questions about the relation between the maximization of shareholder value and the sustainability of economic prosperity.
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John Smith, President In 1983, after years of serving as a Technology Consultant and IT Manager for various local govenment agencies, John founded ABC Information Solutions. He saw the need for a local company that...
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