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10 - Why the Business Roundtable CEOs Should Have Stayed the Course

from Part II - The Merits

Published online by Cambridge University Press:  02 February 2023

Stephen M. Bainbridge
Stephen M. Bainbridge
Affiliation:
University of California, Los Angeles
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Summary

Stakeholder capitalism results in a loss of accountability, as executives who are responsible to everyone are responsible to no one. Stakeholder capitalism would be extremely difficult to implement. Proposed means of doing so – such as constituency boards, codetermination, and team production – are all unworkable. Stakeholder capitalism is inconsistent with democratic capitalism. Shareholder value maximization is the result that would emerge if shareholder and stakeholders could bargain (the so-called hypothetical bargain). Shareholder capitalism is pro-social. The profit motive results in socially efficient resource allocation. The profit motive is an essential motivational spark for innovation. The profit motive promotes freedom.

Keywords

corporate social responsibilitycorporate governanceshareholder value maximizationESGcorporate lawstakeholder capitalismprofitfiduciary dutylawbusiness ethicscorporate purposecontractarianismnexus of contractshypothetical bargain
Type
Chapter
Information
The Profit Motive
Defending Shareholder Value Maximization
 , pp. 125 - 168
Publisher: Cambridge University Press
Print publication year: 2023

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