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A book by Alfred Rappaport,
Free Press: 1998.
195 pages. $49.00.
The concept of shareholder value got a real workout in the 1980s when brazen corporate raiders bought up undervalued companies and reworked them for the benefit of investors, themselves included.
The resulting downsizings led to criticism of the shareholder value approach. But, Alfred Rappaport is unrepentant. The Northwestern University business professor and consultant who codified some of the ideas behind the shareholder value approach in Creating Shareholder Value is back, 12 years later, with a revised and expanded edition of his groundbreaking book.
For Rappaport, the fundamental objective of the business corporation should be to provide maximum return for shareholders in the form of dividends and capital gains. Trying to please all stakeholders directly is senseless and probably suicidal. "In a market-based economy that recognizes the rights of private property, the only social responsibility of business is to create shareholder value and to do so legally and with integrity." It is up to democratically elected legislators to decide what is in the broader social interest. Management's overarching goal must...