Should Someone Who Believes in Economic Laissez-Faire Also Believe in Shareholder Primacy?

29 01 2020

In recent weeks, I’ve observed a curious pattern in the debates in the academic world about corporate purpose: I’ve noticed that some libertarian authors assume that shareholder primacy is the position in the debate on corporate purpose that someone who believes in deregulation, a smaller state, etc should favour. In this blog post, I would like to question this unexamined assumption, doing so by drawing on my knowledge of the history of corporate governance (I’ve published a bit in this area and on the evolution of our ideas about corporate purpose).


Here is some context: in recent years, a debate about corporate purpose has raged. Is the purpose of a (business) corporation simply to maximize the profits that can be distributed back to the stockholders? Or should managers balance the interests of shareholders against those of other stakeholders, such as workers? The latter normative view, the stakeholder theory, was recently endorsed by the Business Roundtable, a group of US CEOs.


In a recent blog post, Alberto Mingardi, a libertarian academic in Italy, recently critiqued stakeholder theory on the grounds that it is (somehow) incompatible with limited government and free-markets. I know that Mingardi, who is an Assistant Professor in History of Political Thought at IULM University of Milan, is a smart guy. However, I would encourage him to rethink his assumption that stakeholder theory is incompatible with his political commitments. In fact, if you want to avoid a world in which the state subjects private firms to mass of bureaucratic regulations, you should probably want managers to absorb the norm that they should not maximize shareholders’ profits whenever it is legal to do so. If policymakers believe that managers will exploit every last opportunity to maximize profits for shareholders whenever doing so isn’t illegal, they are more likely to impose lots of regulations on companies than if they hear managers say that they will take the interests of non-shareholder stakeholders into account.

Mingardi wrote:

As [are] most libertarians, I’m not a fan of the word “stakeholder”. To my eyes, it seems to be a shortcut for a corporatist economy. By contrasting shareholders and stakeholders, some authors seem to point in the direction of a muddled kind of capitalism, one in which businesses – rather than caring for the interests of those who actually own them – are supposed to picture themselves as doing the interests of all people somewhat concerned with their activities. Sure enough, entrepreneurs need not a “social conscience” to care about their workers and their suppliers. Their self-interest would suffice: happy employees are likely to be more productive, and if you don’t treat your suppliers decently you do so at your own risk. But stakeholder capitalism, as it is somehow called, aims at being a capitalism in which profits are deemed to be a second-order concern. There are some activities in life that cannot be managed under the profit motive (I think of a large chunk of the nonprofit sector, that does indeed do valuable things), but in the case of businesses, the refusal of taking profits into consideration could easily become a cover-up for inefficiency – if not for a conflict of interest altogether.



In associating shareholder primacy with the free market and stakeholder theory with the opposite of the free market, Dr Mingardi appears to be overlooking the management research has demonstrated that entrepreneurs establish firms for a range of reasons. In some cases, perhaps a minority, the motivation is purely to maximize the ROI of the investors who put capital in the enterprise. In other cases, the founders of firms are trying to achieve a bunch of different objectives, such as the maximization of the owners’ socio-emotional wealth (SEW) or some other non-economic objective.  For many firms, especially family firms, the interests of the shareholder are not paramount. Consider the cases of Hobby Lobby, a Christian-run firm in the US that was savaged in the media because of company policies that many secular people regard as unacceptable.  Hobby Lobby clearly isn’t a firm that is managed so as to maximize shareholder value. I can think of other organizations that fall into our category of “for-profit company” and which do things that cost a lot of money but which reflect the values of the founders. The Body Shop, which is loved by some of my New Age, animal rights friends, is such a firm.


I would suggest that in a free country, the state should, in general, be neutral on issues of corporate purpose just as it is neutral on issues of religion or whether citizens keep kosher, eat vegan, or adopt some other type of values-based diet. We should accept that in large population of firms, some will indeed be managed according the principle of shareholder primacy but that there were will also be firms with a range of other goals as well. Some of these firms will behave in ways that appear to straddle the category between for-profit firm and charity and that’s ok too, since the Western distinction between firms and charitable foundations isn’t a naturally occurring one that we need to accept uncritically.

As long as firms aren’t defrauding investors or otherwise breaking the law, the government ought to be cool with firms having different views of corporate purpose. Let a thousand flowers bloom in terms of corporate purpose. Forcing organizations to select just one purpose (e.g. maximizing profits for the shareholders OR a charitable goal) from a very limited menu seems illiberal to me. I suppose the decision of policymakers in some US states to give their blessing to a new organizational firm, the B Corporation, is a move in the right direction, but we are still in a world in which the state forces organizations to make choices from a limited menu that is written by the state, for the most part. That’s why definitions of corporate purpose vary so dramatically from one jurisdiction to the next, even within Europe.

In recent decades, the prevailing conception of corporate purpose, at least in the United States and some other English-speaking jurisdictions, has been the shareholder wealth maximization norm. There is a lot of evidence that managers see the maximizing shareholder value as the essential purpose of the company,  there are baneful consequences for workers, local community, and R&D spending. Even Jack Welch has called shareholder primacy the dumbest idea in the world. He’s no liberal.

It is not widely appreciated that the organs of the state, particularly, the SEC and the courts, have played a major role in promoting the idea that a manager’s core duty is to maximize the wealth of the stockholders.  This doctrine didn’t become dominant in the English-speaking countries naturally.  As Professor Stephen Bainbridge observes “The shareholder wealth maximization norm, pursuant to which directors are obliged to make a decision based solely on the basis of longterm shareholder gain. This principle is well-established in U.S. corporate law”

If you think that the government should be neutral on the question of corporate purpose, the fact the state in the US and other English-speaking countries are so biased towards the shareholder primacy norm is a problem.  Another problem I see with the existing law governing organizations is that they force organizations to make a hard choice between being in the non-profit category by incorporating as a non-profit or incorporating a profit-seeking company. The SEC, the IRS, etc they all operate on a black-and-white system of categories that doesn’t really accommodate intermediate forms with mixed corporate purposes. You are either in one category or another. I suppose the creation, with the approval of the state, of the Benefit Corporation is an improvement as it puts another choice on the menu of organizational forms, but ultimately the government is forcing organizations into categories. I think the consequences of that forcing, which now include shareholder primacy, can be pernicious.

For several generations, the US government has been telling US firms to maximize shareholder value.  One of the unintended consequences the creation of the SEC in the 1930s is that the Commission later began telling managers to put the interests of shareholders first.  Elizabeth Warren has recently proposed using the SEC to force US executives to abandon shareholder primacy. I would point out that the SEC played a crucial role in the revival of that doctrine in the 1970s and 1980s.

I’m reminded of the Simpsons episode in which alcohol is proclaimed to be “the cause of, and solution to, all of life’s problems.” My sense is that when future historians of corporate governance look back at the SEC’s role in changing how Americans conceptualize corporate purpose, they might come to similar conclusions.




Why Business and Economic Historians Should Present at the Academy of Management’s Management History Division

3 01 2020

Many of the people who follow my semi-regular blog self-identify as business historians or economic historians. A significant proportion of these individuals work in management schools. I would strongly encourage people who have traditionally presented at business history conferences to consider presenting at the 2020 Academy of Management conference, which will be held in the beautiful city of Vancouver in August. The Academy of Management has long had a Management History Division and there is currently a concerted effort underway to grow the Division and to make it the venue for the presentation of historical research of the highest calibre. This blog post is, therefore, a call for business historians, economic historians, historical EGOSians, and the other historical researchers to submit their papers to the MH division. You may send us your submissions through the AOM Submission Center until it closes on Tuesday, 14 January 2020 at 5:00 PM ET (NY Time). The Submission Center opens in early December 2019.

The Academy of Management procedure and terminology may seem a bit unusual to neophyte AoM attendees. If you have questions about such as matters as the difference between a PDW and a Symposium, feel free to contact either me or any other member of the MH executive. The key thing to know right now is that if you want to present a paper the AoM, you need to submit a fairly good, or at least complete draft of it, by the deadline for 14 August. Papers go through a peer review process before they are accepted or rejected.


Attending the Academy of Management is expensive, especially since it the arrival of 10,000 plus management academics in a city tends to push up the price of hotel rooms. However, I think that attending this conference would be worth it for many readers of this blog for the following reasons:


  • The AoM is a great opportunity of networking and professional advancement.
  • Attending the AoM gives historical researches a chance to learn from the editors of high-impact factor journals about their expectations.
  • The MH is methodologically diverse and includes papers that use a range of quantitative and qualitative methods. It is a broad church in terms of methodology.
  • The AoM is also characterised by a high degree of viewpoint diversity, which is the hallmark of a top-notch social scientific conference. You have Austrian economists who are hardcore libertarians. You have Marxists. You have everything in between. You have papers that are co-authored by teams of academics that are ideologically diverse. That diversity is a good sign.
  • The MH division and the AoM is very diverse in terms of nationality and about 40% of presenters are non-North American.

CFP 2020 AoM Management History (MH) Division

12 12 2019

The Management History (MH) Division invites PDW, symposium, and paper submissions for the 80th Annual Meeting of the Academy of Management to be held in Vancouver, British Columbia, Canada from 7 – 11 August 2020. You may send us your submissions through the AOM Submission Center until it closes on Tuesday, 14 January 2020 at 5:00 PM ET (NY Time). The Submission Center opens in early December 2019.


Conference Theme: This year’s conference theme is “20/20: Broadening our Sight” and encourages us to widen our view when examining our domain, practice and organizational phenomena. We encourage you to make connections to the theme wherever possible in preparing your submission.


Our Domain: The Management History (MH) Division is a wide-ranging network of scholars interested in the antecedents of modern business practice and thought. We invite submissions of empirical and conceptual papers, as well as proposals for symposia (including panel discussions, debates, and roundtables), for consideration for inclusion in the division’s scholarly program. We encourage submissions from all members of the academy interested in devoting or sharing their work in management history broadly defined.


As there is an element of history within every division in the Academy, the division is open to a variety of methodological approaches and themes ranging from historical events in management practice (empirical focus) to studies that engage with historiography, philosophies of history, and the history of ideas and management thought (theoretical orientation). In this spirit, the MH Division welcomes scholarly contributions that generate meaningful and original contributions in history from across all AOM divisions’ interest groups. Submissions for sessions sponsored jointly with other Academy divisions are regarded as particularly attractive, and highly encouraged. The MH Division encourages submissions from doctoral students. Papers with a PhD student as the first or sole author should be clearly identified when submitted to allow identification of possible winners of the Best Graduate Student Paper.


See our call for PDWs:


And our call for the scholarly program:


We’re looking forward to seeing you in Vancouver,


Roy Suddaby, Program Chair ( and Trish McLaren, PDW Chair (


Using Versus Excusing: The Hudson’s Bay Company’s Long-Term Engagement with Its (Problematic) Past

2 11 2019

By Unknown /Valentine & Sons Ltd., Montreal + Toronto. Printed in London. – Ebay „scview“, Public Domain,

Many companies use their histories. For some companies, especially firms that aren’t trying to compete on price, being able to tell a compelling story about their long history is a major source of competitive advantage. Canada’s Hudson’s Bay Company is an extreme example of that. For over a century, the HBC’s ability to use history has helped the firm to overcome many challenges, such as the invasion by US retail chains such as Sears and more recently the internet-driven Retail Apocalypse. But what happens if a group of activists starting saying that the company’s history is something to be ashamed of rather than proud of? What should the managers of the company do then?

The paper I co-authored paper with Wim Van Lent of Montpellier Business School looks at how the HBC has responded to Indigenous social activists who have charged that the firm’s great wealth came from exploiting Indigenous peoples and involvement in a wider project of what is now called cultural genocide (for examples of such claims, see this 2016 article in Maclean’s magazine). The paper was published today in Journal of Business Ethics, a journal on the Financial Times 50 list of top journals for management research.

In addition to being of interest to management academics and business practitioners in Canada and other New World countries (e.g., Australia) who think about relations between Indigenous peoples and business, this paper speaks to broader debates about how firms use history and respond to accusations of historical misdeeds.

You can read the paper here.

PDW CfP: Uses of the Past- Perspectives, Forms and Concepts in Business History

29 10 2019

Uses of the Past- Perspectives, Forms and Concepts in Business History


CBS Paper Development Workshop

Business History Conference, Charlotte, NC, March 12, 2020

In the past years, uses of the past has become a prominent research theme for business historians and organization scholars alike. Studies on the usefulness and appropriation of the past have appeared across diverse fields such as business history, organization studies, marketing, learning & education, and CSR. Uses of history is fashionable. But where will the field go in the future?

In the CBS PDW we seek to focus on questions that have yet to asked, and we would like to explore the theories and methods that might take the field forward.

The workshop offers an opportunity to get feedback and generate ideas of how to develop concrete paper drafts that deal, one way or the other, with uses of the past. In addition, the PDW will serve as a forum where we can discuss future directions and opportunities (and potential dead ends) going forward with a ‘uses-of-the-past’ agenda. What are the questions and research that are yet to be explored, and what are the role for business historians in shaping a ‘uses-of the past’ research agenda?

Themes to be explored in the papers could include, amongst others:

  • Uses of the past for branding, strategy and identity purposes
  • Corporate and public museums
  • The use (and abuse?) of organizational anniversaries
  • Uses of history in action
  • The role and practices of historical consultancies (e.g. Winthrop Group, The History Factory and others)
  • Historical CSR
  • Theoretical and methodological perspectives connected to uses of the past.
  • Critical perspectives on uses of the past

Submitted texts could take form as extended abstracts or full paper drafts. The important thing is that readers can identify the key arguments, theories and empirical material, for them to provide useful feedback, suggestions and comments.

Depending on the submitted abstracts and full papers, the participants and organizers could potentially explore the opportunity of a subsequent special issue on uses of the past in a relevant academic publication, such as, for example Business History.

Participants are expected to read all circulated papers. Please submit a paper draft or extended abstract before January 10, 2020 to the workshop organizers.

Anders Ravn Sørensen,

Morten Tinning,

Collusion and combines in Canada, 1880–1890

24 10 2019

I’m very happy to promote a new paper by Vincent Geloso on the history of competition policy in Canada. Given that anti-trust is a sexy topic right now, thanks to the efforts of scholars such as Tim Wu and other “hipster anti-trust” types, the publication of this article is timely.


It is a little-known fact that Canada adopted its own antitrust law one year before the landmark Sherman Antitrust Act of 1890. The Anti-Combines Act of 1889 (‘the Act’) was adopted after a decade in which ‘combines’ (the Canadian equivalent of ‘trusts’) had grown more numerous. From the combines’ numbers, Canadian historians, legal scholars, and economists have inferred that consumer welfare was hindered. However, price and output evidence has never been marshalled to provide even a first step towards assessing the veracity of this inference. This paper undertakes that task. I highlight the fact that the output from industries accused of collusion increased faster than national output in the decade before the passage of the Act and that their prices accordingly fell faster than the national price index. I argue that these findings militate for the position that the origins of Canada’s Anti-Combines Act were partially rooted in rent-seeking processes similar to those that American scholars have found driving the Sherman Antitrust Act of 1890.


A Business Historian’s Thoughts on Reparations for Slavery

18 09 2019

Reparations for slavery are very much in the news, both in the US, where the Democratic presidential primary has included debates about this issue, and here in the UK, where the University of Glasgow has agreed to pay slavery reparations in the form of a joint venture with the University of the West Indies to be called the Glasgow-Caribbean Centre for Development Research. The descendants of African slaves, particularly those who live in developing countries such as Jamaica, deserve compensation, although I’m not convinced that the University of Glasgow reparation scheme would really stand up to much scrutiny when viewed with an effective altruism lens. (An unconditional cash transfer to the poorest individuals in Jamaica would likely be a more cost-effective form of reparations).  Rather ironically, I think that many development experts (e.g., Chris Blattman) would probably doubt the cost-effectiveness of the Glasgow-Caribbean Centre for Development Research as mechanism for reparations.

The present-day issue of reparations for slavery and similar historic human right abuses is a very complex one and I have a relatively open mind about how reparations should be structured.  However, there are some principles that I think should guide our discussions.  My own view is that it is legitimate to ask corporations such as the University of Glasgow to pay reparations but that it wouldn’t be legitimate to track down and demand payment from the descendants of the natural persons who owned slaves. The same principle applies to German companies involved in the Holocaust, an event that is still within living memory.

That being said, it is really unfortunate when the politics of reparations distorts economic-historical research aimed at measuring the role of slavery in promoting economic growth. I’m thinking here of  the much discussed research of the highly controversial historian Ed Baptist. Rhetorical history used by social activists and peer-reviewed academic history should not be confused as it does a disservice to both. Baptist is a clearly a citizen who cares greatly about injustices in the present. He’s right to do so. However, his claims that the wealth the US enjoys today is largely or substantially the result of slavery has been demolished by respected researchers, as are many of the supporting arguments he has marshalled to try to support this argument. I also find the “ghost acres/sugar calories from slaves” argument that has been advanced to explain why England not China had the Industrial Revolution to be implausible as a way of accounting for the Great Divergence.

I think that it is really important for us as researchers to distinguish between political activism and advocacy for legitimate causes and academic research. To blend the two risks distorting scholarly research and, crucially, distorting the allocation of scarce resources to philanthropic ventures that have high administrative overheads and a low altruistic rate of return.

I would also suggest that the narrow focus in the slavery reparations debate on getting institutions in Western countries to pay reparations risks diverting attention from the issue of Modern Slavery.  Near slavery conditions can be found in the oil rich countries in the Arabian peninsula that use the “kafala system” — in fact, given that African chattel slavery was only abolished some of these countries a few years before the kafala system was implemented in the wake of the post-1973 boom of these countries, one can argue that the linkages between historical slavery and present-day injustice are much stronger in this part of the world than in the West. Slavery was abolished in what is now the UAE in 1963 and only after sustained pressure from Britain.