HBR IdeaCast 4 Business Ideas That Changed the World: Shareholder Value
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Oct 20, 2022 Lynn Paine, a Harvard Business School professor and governance expert, joins Mihir Desai, specializing in corporate finance, and Carola Frydman, a corporate historian at Kellogg, to discuss the evolution of shareholder value. They delve into its rise in the 1970s and the subsequent challenges it faced, including critiques of its impact on jobs and the environment. As stakeholder capitalism gains traction, they explore the need for companies to balance diverse interests and scrutinize the implications of integrating ESG metrics into governance.
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Shareholder vs. Management Tension
- The rise of large corporations needing capital led to a separation of ownership and control.
- This dynamic created tension between shareholders and professional managers.
Early Corporate Interest Debates
- Early debates about corporate interests arose in the 1920s and 30s.
- Scholars like Berle and Dodd discussed whether managers served shareholders or multiple constituencies.
Pre-1970s Stakeholder Influence
- Pre-1970s, companies sometimes acted in stakeholder interests due to external pressures, not solely moral reasons.
- Unions and the threat of unionization influenced companies to offer welfare benefits, like company towns.
