The hegemony of shareholder value in the Anglo-American Corporation

The purpose of this article is to show how historically Anglo-American company law has retained an ideological commitment to shareholder value as its principal goal over a long period. It argues that whilst company law in both countries have gone through periods of change, shareholder value has remained the ideological fixed point from the origins of the company to now, subject only to genuine contestation during a relatively short period between the later 1930s to the early 1970s. The article maintains that though the corporation has made a successful transition from early origins as an organisation privileged by the state and interwoven in state activities into a market creature, it continues to privilege the wealthy by, inter alia, prioritizing the pursuit of shareholder value. In America this is achieved largely through state competition for incorporations. In England it is achieved through the promotion of shareholders as owners. Furthermore this article shows that to a great degree the ideology which supports shareholder value is sustained by Berle and Means’s thesis that control has become separated from ownership. First, because this relocates the issue of power away from investors and second, because it must be the premise upon which, the ‘race to the top’ theory pertinent to the United States is founded and justified. It concludes that this premise must be refuted first because it is does not properly describe ownership patterns in large corporations and second because without an appreciation of the existence of ‘economic ownership’, governance strategies will continue to posit the problem as one of ‘agency’ rather than of the pursuit of shareholder value. In so doing the problem of pursuing unfeasibly high shareholder expectations and its evitable tendency to create financial bubble is overlooked. To a large degree, the current financial crisis, like its predecessors, has not been caused by agency problem but has been caused by agents faithfully pursing the ideologically dominant objective of enhancing shareholder value