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Change in Business Objective Shareholder Value vs. Stakeholder Value Primacy Concepts Victoria Krivogorsky
Introduction The financial crisis of 2008 reinvigorated the discussion on business objective, and as a result, “enlightened shareholder value” (ESV) has been introduced as an alternative vision of the corporate purpose. Under ESV the attention to corporate stakeholders, including employees, creditors, customers, and local communities, is seen as critical to generating longterm shareholder wealth as a direct emphasis on serving shareholders’ interests. Thus, this study re-examines a vision of the business objective and directors’ duties that define the division between the shareholderstakeholder models that have traditionally existed in the literature. With the initiation of the ESV approach, which has been statutorily introduced in the UK, the previously well-defined partition between two traditional models becomes blurry. Until not long ago, both the UK and the US were recognized as the countries where maximization of shareholder value (SV) has continuously been the traditional business objective for years. In this respect, the current departure from the shareholder model observed in the UK presents a unique opportunity to analyze changes in the corporate purpose. This situation is especially exceptional for several reasons. First, the transformation of the shareholder welfare supremacy presumption became worthy of note when the notion of “customer-driven capitalism” was named in the business literature as a competitive model 40 years ago or so. Advocates of the customer-driven capitalism model have argued that SV maximization should give way to customer-driven capitalism, in which firms “should instead aim to maximize customer satisfaction” (Martin, 2010).1 In this regard, Paul Polman, the CEO of Unilever, a consumer-goods giant, said to the Financial Times in March 2010, “I do not work for the shareholder, to be honest; I work for the consumer, the customer . . . I’m not driven, and I don’t drive this business model by driving shareholder value.” Second, because the new ESV model (adopted into UK law in the Companies Act 2006) does not represent a full departure from previously utilized SV model, nor does it exemplify an
