How exactly does the terminal goal of benefiting shareholders disappear[…]
But does this terminal goal exist today? The proper (and to some extent actual) goal of firms is widely considered to be maximizing share value, but this is manifestly not the same as maximizing shareholder value — or even benefiting shareholders. For example:
I hold shares in Company A, which maximizes its share value through actions that poison me or the society I live in. My shares gain value, but I suffer net harm.
Company A increases its value by locking its customers into a dependency relationship, then exploits that relationship. I hold shares, but am also a customer, and suffer net harm.
I hold shares in A, but also in competing Company B. Company A gains incremental value by destroying B, my shares in B become worthless, and the value of my stock portfolio decreases. Note that diversified portfolios will typically include holdings of competing firms, each of which takes no account of the value of the other.
Equating share value with shareholder value is obviously wrong (even when considering only share value!) and is potentially lethal. This conceptual error both encourages complacency regarding the alignment of corporate behavior with human interests and undercuts efforts to improve that alignment.
But does this terminal goal exist today? The proper (and to some extent actual) goal of firms is widely considered to be maximizing share value, but this is manifestly not the same as maximizing shareholder value — or even benefiting shareholders. For example:
I hold shares in Company A, which maximizes its share value through actions that poison me or the society I live in. My shares gain value, but I suffer net harm.
Company A increases its value by locking its customers into a dependency relationship, then exploits that relationship. I hold shares, but am also a customer, and suffer net harm.
I hold shares in A, but also in competing Company B. Company A gains incremental value by destroying B, my shares in B become worthless, and the value of my stock portfolio decreases. Note that diversified portfolios will typically include holdings of competing firms, each of which takes no account of the value of the other.
Equating share value with shareholder value is obviously wrong (even when considering only share value!) and is potentially lethal. This conceptual error both encourages complacency regarding the alignment of corporate behavior with human interests and undercuts efforts to improve that alignment.