The Business Roundtable represents the chief executives of nearly 200 of the nation’s largest businesses, so it matters when it speaks about business management. Its recent statement renouncing the “shareholder value” theory of management is therefore an important step toward renewing the social compact of the United States.
The shareholder value theory of management became all the rage in the 1990s. That theory held that the primary, if not the sole, purpose of the corporation was to return maximum value to its shareholders. Endorsed by the roundtable in 1997 and reaffirmed repeatedly until this week, the theory formed the heart of modern U.S. business management practice.
Henry Olsen is a senior fellow at the Ethics and Public Policy Center.