Business Scholarship Podcast
Stephen Bainbridge on the Profit Motive
- The Case for Shareholder Value Maximization
- ESG and Stakeholder Governance vs Shareholder Value Maximization
- Leo Strine's Critique and Closing Thoughts
Stephen Bainbridge discusses his new book, The Profit Motive, Defending Shareholder Value Maximization. The book presents arguments for stakeholder capitalism fairly but ultimately disagrees with them. It defends the shareholder value maximization approach by providing a clear description of the law and engaging non-lawyers in understanding why the law is structured as it is. The book aims to maximize long-term shareholder value within legal and regulated boundaries, emphasizing the importance of society regulating corporate behavior through laws.
00:06 - 09:43
- Stephen Bainbridge discusses his new book, The Profit Motive, Defending Shareholder Value Maximization.
- In the past, the purpose of corporations was primarily to increase profits.
- There has been a shift towards a more stakeholder-focused view of corporations.
- Younger scholars are more open to ESG and stakeholder capitalism.
- The book is a response to the increased interest in stakeholder capitalism.
- The author aims to defend shareholder value maximization.
- The author was prompted to write the book after the Business Roundtable adopted stakeholder capitalism in 2019.
- Many CEOs and investors have embraced ESG and stakeholder capitalism.
- Most books on the market support stakeholder capitalism, but there is no persuasive defense of traditional shareholder value maximization.
- The author presents arguments for stakeholder capitalism fairly but ultimately disagrees with them.
Leo Strine's Critique and Closing Thoughts
27:04 - 33:40
- Leo Strine, former chief justice of the Delaware Supreme Court, criticizes academic arguments that shareholder value maximization is not the law
- The book aims to provide a clear description of the law accessible to non-lawyers
- The goal is to engage non-lawyers in understanding and questioning why the law is structured as it is
- The book targets both an academic audience and non-lawyers/non-academics
- Closing thoughts emphasize that the argument is not for corporations to exploit employees or harm the planet, but rather for directors to make decisions that maximize long-term shareholder value within legal and regulated boundaries
- Society should regulate corporate behavior through laws rather than relying on business to solve social issues