Shareholder capitalism is the overarching theme in university finance courses. We teach it in Finance 101. Its maxim is the purpose of a business is to create wealth for its owners. It I never thought that was controversial, but shareholder capitalism is increasingly under attack. No framework is perfect, but many of the criticisms of shareholder capitalism misrepresent it. At the same time, the various corporate social responsibility frameworks proposed as substitutes have their own problems and do not come as advertised. 

The typical finance course focuses on analytical tools and has little to say about these types of big-picture issues. This book fills that void and paints a more accurate picture of shareholder capitalism and the corporate social responsibility frameworks vying to replace it. 

The book is divided into three sections. The first section describes what shareholder capitalism is, and what it is not. A good deal of attention is given to how shareholder capitalism impacts non-shareholders. If businesses are run with the goal of maximizing shareholder value, what are the ramifications for other stakeholders, such as employees, customers, and suppliers? What role does shareholder capitalism play in promoting economic growth and raising living standards? The second section of the book deals with the major criticisms of shareholder capitalism. What are they? Are they valid?  The third section examines corporate social responsibility, which encompasses the newer idioms, such as ESG, stakeholder capitalism, and sustainability. What does it mean for a corporation to be socially responsible? What effects does the pursuit of corporate social responsibility have on shareholders and the rest of society?

You can watch me discuss the book at a book forum hosted by the Cato Institute. You can order a copy of the book here.

Endorsements

“Shareholder capitalism is accused of being the cause of all the world’s problems. This eye-opening book highlights that shareholder capitalism involves mutually beneficial trade, pursuing bold innovations that address society’s challenges, and creating long-term value for stakeholders. It’s based on sound economic principles, not ideology, yet is highly readable and brimming with real-world examples. Read it—it will change the way you think.” 

-Alex Edmans, author of Grow the Pie: How Great Companies Deliver Both Purpose and Profit and professor of finance at the London Business School

“This book is a must-read for anyone who wants to understand what shareholder capitalism is and what it is not. David McLean offers a full-throated defense of shareholder capitalism by drawing on historical insights from notable economists such as Adam Smith, Joseph Schumpeter, Milton Friedman, and Thomas Sowell and linking them to current real-world examples. This highly readable book compares and contrasts the shareholder capitalism approach to the stakeholder capitalism approach to dispel common misinformation, misconceptions, and fallacies about both.” 

-Michael Piwowar, former commissioner of the U.S. Securities and Exchange Commission and former member of the President’s Council of Economic Advisers

“Few ideas are more salient than the shareholder wealth maximization principle for continued growth and survival of humanity. David McLean not only blunts the serious assaults leveled against it but presents the shareholder wealth maximization principle in a lucid, accessible narrative that is sprinkled with historical anecdotes. The book has the potential to set straight those who have misguided concerns about the shareholder model and arm the believers with cogent arguments extolling the virtues of maximizing shareholder wealth.” 

-S. P. Kothari, professor of accounting and finance at MIT and former chief economist and director at the U.S. Securities and Exchange Commission