1/ Marvin Bower, former MD McKinsey in 1990:
"the security analysts and investor groups who say if the value isn't being achieved then it's the responsibility of a chief executive...
...I don't believe that's the purpose of an organization."
👇 This debate started in 1900s
"the security analysts and investor groups who say if the value isn't being achieved then it's the responsibility of a chief executive...
...I don't believe that's the purpose of an organization."
👇 This debate started in 1900s
2/ In one corner was Adolph Berle, who championed the “shareholder primacy” view and in the other was Merrick Dodd who supported a “managerialist” stance. 
3/ The managerialist view said that firms should serve not only shareholders, but multiple stakeholders including employees and the public good.
This had emerged by the early 1900s as the common knowledge way of running a company
This had emerged by the early 1900s as the common knowledge way of running a company
4/ In 1932 Berle first put forwards his view that shareholders should come first in "The Modern Corporation and Private Property"
The view had some interest but the law and conventional wisdom were still in the managerialist view.
The view had some interest but the law and conventional wisdom were still in the managerialist view.
5/ A famous case affirmed this at late as1968 when a court ruled that the Wrigley family, the owners of the Chicago Cubs, could use their business judgement to refuse to have night games even if it was clear that it hurt revenues and shareholders
6/ It was not until the 1970s that public opinion started to shift when Milton Friedman published his famous essay in the New York Times "A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits"
7/ Friedman had great ideas but his argument was really that it was easier to focus on shareholder value:
"Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward"
"Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward"
8/ In the words of Columbia Law Professor Jeffrey Gordon, “the triumph of the shareholder value criterion was nearly complete.” by 1990 when Bower gave that speech
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