shareholder values

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Marion Nestle's "Utopian Dream: A New Farm Bill" (Dissent, Spring 2012) contains this bit of historical sleuthing:

"Further increasing competition was the advent of the shareholder value movement to force corporations to produce more immediate and higher returns on investment. The start of the movement is often attributed to a 1981 speech given by Jack Welch, then head of General Electric, in which he insisted that corporations owed shareholders the benefits of faster growth and higher profit margins. The movement caught on quickly, and Wall Street soon began to press companies to report growth in profits ever quarter." (p. 17)

Jack Welch's speech at The Hotel Pierre in New York City entitled "Growing fast in a slow-growth economy" (8 December 1981) and was printed as Appendix A in Jack: Straight from the Gut (pp. 447-451). However, its actual content seems far too mild to have catalyzed such a movement. I would suggest instead that the impetus dated back at least to Milton Friedman's Capitalism and Freedom a half-century ago:

The view has been gaining widespread acceptance that corporate officials and labor leaders have a "social responsibility" that goes beyond serving the interest of their stockholders or their members. This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. [...] Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. (p. 133)

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This page contains a single entry by cognitivedissident published on May 26, 2012 9:51 PM.

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