Deconstructing the Mythology of Shareholder Value: A Comment on Lynn Stout’s “The Shareholder Value Myth”

This review article seeks to celebrate the deconstruction of the mythology of shareholder value inspired by Lynn Stout, and to dismantle the hegemony of agency theory, which originated the concepts of shareholder value and shareholder primacy. In order to offer a contextualized, historical critique of the intellectual forces that created agency theory and the concept of shareholder value, the analysis presents a broad consideration of the financialization of the Anglo-American corporation in the later decades of the twentieth century. It was in this period that the Anglo-American corporation was crudely transformed from being a wealth-creating vehicle for the wider community of stakeholders and whole economy, into a bundle of assets with the sole purpose of benefiting shareholder interests. This analysis traces some of the historical critique of corporate purpose, and the wider implications of the critique for corporate activity. The article goes on to analyse the interpretations of corporate purpose emerging in modern company law reform. Finally, the article considers the implications of the growing international corporate social responsibility movement for directors’ duties, which is arguably in contradiction to many of the fundamental beliefs of shareholder value, and recasts the direction of corporations towards more responsible and sustainable value creation.