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The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public Paperback – May 7, 2012


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Product Details

  • Paperback: 120 pages
  • Publisher: Berrett-Koehler Publishers; 1 edition (May 7, 2012)
  • Language: English
  • ISBN-10: 1605098132
  • ISBN-13: 978-1605098135
  • Product Dimensions: 8.5 x 5.6 x 0.4 inches
  • Shipping Weight: 7.2 ounces (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (35 customer reviews)
  • Amazon Best Sellers Rank: #171,047 in Books (See Top 100 in Books)

Editorial Reviews

Review

“A must-read for managers, directors, and policymakers interested in getting America back in the business of creating real value for the long term.”
—Constance E. Bagley, Professor, Yale School of Management; President, Academy of Legal Studies in Business; and author of Managers and the Legal Environment and Winning Legally

“A compelling call for radically changing the way business is done…, The Shareholder Value Myth powerfully demonstrates both the dangers of the shareholder value rule and the falseness of its alleged legal necessity.”
—Joel Bakan, Professor, The University of British Columbia, and author of the book and film The Corporation

“Lynn Stout has a keen mind, a sharp pen, and an unbending sense of fearlessness. Her book is a must-read for anyone interested in understanding the root causes of the current financial calamity.”
—Jack Willoughby, Senior Editor, Barron’s

“Lynn Stout offers a new vision of good corporate governance that serves investors, firms, and the American economy.”
—Judy Samuelson, Executive Director, Business and Society Program, The Aspen Institute
 

About the Author

Lynn Stout is the Marc and Beth Goldberg Distinguished Visiting Professor of Law at Cornell Law School. Her work on corporate theory was cited by Supreme Court Justice John Paul Stevens in his dissent in Citizens United.

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Customer Reviews

Her use of metaphors is very helpful in making the information accessible.
Evelyn Uyemura
The Shareholder Value Myth makes a strong argument that a corporate focus on one goal, maximizing shareholder value, is a ruinous path.
James Mcritchie
Examples from the financial world and from giant bailed out companies like GM have been front-page news since at least 2008.
Frazer Rice

Most Helpful Customer Reviews

15 of 16 people found the following review helpful By Mal Warwick on April 8, 2013
Format: Kindle Edition Verified Purchase
If you so much as skim the business pages in a newspaper, there's little doubt you've heard it said or seen it written that corporate officers and directors are required by law to maximize shareholder value and that they're subject to lawsuits if their decisions favor any other stakeholder such as employees, customers, or suppliers over profit. The well-entrenched view that shareholders are paramount is widely regarded as the cornerstone of contemporary business law -- and it's flatly untrue.

In The Shareholder Value Myth, business law professor Lynn Stout proves this point, citing chapter and verse in court decisions going back more than a century. "So long as a board can claim its members honestly believe that what they're doing is best for `the corporation in the long run,' courts will not interfere with a disinterested board's decisions -- even decisions that reduce share price today." Having laid the legal groundwork, Stout then proceeds to explain how this mistaken view of shareholder primacy is bad for business.

"Put bluntly," she writes, "conventional shareholder value thinking is a mistake for most firms -- and a big mistake at that. Shareholder value thinking causes corporate managers to focus myopically on short-term earnings reports at the expense of long-term performance; discourages investment and innovation; harms employees, customers, and communities; and causes companies to indulge in reckless, sociopathic, and socially irresponsible behaviors." Among the examples Stout cites is the Gulf oil spill, caused by excessive cost-cutting on the part of BP. "In trying to save $1 million a day by skimping on safety procedures at the Macondo well, BP cost its shareholders alone a hundred thousand times more, nearly $100 billion." Q.E.D.
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11 of 13 people found the following review helpful By Citizen John TOP 100 REVIEWERVINE VOICE on July 10, 2012
Format: Paperback
In her latest book, Lynn Stout destroys the myth of shareholder value as it is applied to most publicly traded companies. We're constantly bombarded with messages that we should save by buying broad classes of stock such as ETFs. But since most companies aren't governed in an optimal way to build shareholder value over the long run, according to the author, we probably shouldn't get exposed to the market as a whole.

The central problem is that "shareholders" is a term used loosely to stand for a group that doesn't exist in the sense that we collectively think. Shareholders stand pat too often while management systematically loots the company. Shareholders should do something that plaintiff's attorneys will love, if the author is correct, namely sue the management.

Stout recommends investing in companies with dual classes of stock and staggered boards. She likes staggered boards because it helps insulate directors against hostile takeovers and attempts by hedge funds to get to the cash. The downside of staggered boards though is that shareholders can't vote out a controlling number of the rascals in one election.

The book makes forceful arguments for certain reforms as a trade against other problems. Stout made me realize that whereas I feel indignant when I see bad corporate governance, there are no easy solutions.
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Format: Paperback Verified Purchase
[...]

Anyone who has spent any time employed by a public company quickly learns the phrase “in the best interests of the shareholders.” It is used to justify decisions on issues including (and certainly not limited to) strategy, resource allocation, risk, personnel, marketing and reputation. “In the best interests of the shareholders” – much like that booming voice in the “The Wizard of Oz” – always bellows forth from the walled-off chambers of upper management, conveying an unambiguous intention that it should (or must) reverberate from top to bottom, ultimately finding its way into every corporate message and mission statement.

Enhancing shareholder value has become THE indispensable corporate sound bite: difficult to refute, extremely convenient and containing a uniquely disarming aura that quite successfully disguises a dangerously naïve lack of nuance. After all, if a company’s share price is going up, what could the problem possibly be, right? Shareholders and, by extension, management, employees, regulators, vendors and other constituents (pretty much anyone without a short position) ought to be happy. Besides . . . if everybody is saying it . . .

Thankfully, even when it comes to Gospel-esque axioms like shareholder value, the financial world still has fearless and eloquent contrarians. In this case, Lynn Stout, a professor at Cornell University Law School, specializing in corporate and business law, has written an insightful new book entitled, “The Shareholder Value Myth.” She boldly challenges this orthodoxy – and does so from multiple angles.

From the first page to the last, it becomes easier and easier to understand how and why Ms. Stout has earned significant stature in the world of business/legal academia. She’s certainly no pushover.
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3 of 3 people found the following review helpful By Dave Johnson on September 12, 2013
Format: Paperback Verified Purchase
If you just read the chapter on the misunderstanding that shareholders own the corporation, that alone is worth the purchase.
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3 of 3 people found the following review helpful By tax professor on January 12, 2013
Format: Kindle Edition Verified Purchase
A must read for all citizens, liberal and conservative alike. A balanced exploration of the role of corporations. Not a liberal screed at all
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