This supposed legal requirement is a myth. Managers have a lot of leeway in how to justify their decisions as somehow related to corporate interests. The company lawyers are not going around warning managers that if they don't pursue shareholder value, they are putting the company at legal risk. It's not something regulators care about. Company training courses warn employees not to do various illegal things that could get the company in trouble, but failure to pursue shareholder value isn't one of them. (The closest thing might be spending corporate funds on yourself instead of legitimate business expenses.)

The pursuit of shareholder value is more of a cultural norm. Top management and many employees have stock or stock options, so naturally everyone is happy when the stock goes up. Increasing revenues and profits are almost always rewarded. This is all justified as aligning employees' interests with shareholder value.

The article shows that some companies might be moving away from this a little bit. In practice, employees are people who can be motivated by beliefs other than what personally benefits them, and the statement provides a bit of philosophical cover for that. But I expect that growth will continue to be considered good.

The statement is great, and meaningful. Hopefully it's a shot of ethics into a somewhat moribund patient. However there are competitive forces also at play. A company that doesn't boost it's stock price as much as its competitor is at a competitive disadvantage because now it has access to less capital.

If we're really lucky, someone has found a way to objectively value the goodwill generated by taking good care of their customers, employees, and partners. Or perhaps that already existed, and the metric has moved into favoring good behavior for some reason, so these CEOs are agreeing to move together into this new operating theater so they can take maximum advantage of their existing customer base and spend less on churning customers.

It seems like you're approaching this as if businesses are maximizing a function, and that doesn't seem to be how managers make decisions in most places? Competition is important but there are a wide variety of strategies and they are already weighing intangible tradeoffs without necessarily quantifying everything.

Not all managers make good moral or financial decisions, but many do. The very best manage to make both at the same time.

To be fair, I still feel like it all depends on the company's definition of value. There is an interesting book on Financial Analysis by McKinsey, in which two of the firm's partners write in the foreword that the maximisation of shareholder value should always take into account long term thinking, and as such has to consider the deeper effect of a company's action. In that argument, then, a company isn't truly maximising shareholder value when it depletes its workforce and creates a bad work environment for short term profits, because the long term consequences may be far more negative.

Does a corporation’s own definition of value really matter if it’s publicly listed? It seems to me that if it is listed on the market then there is an implicit “exchange rate” between whatever definition the company chooses and the US dollar (or whatever currency the exchange uses), as anyone can buy into the company with the latter, regardless of how the company chooses to value itself.

Yes. The argument is that even if executives are legally bound to maximize shareholder value and nothing else, that they are not in violation as long as they do that, and that this does not necessarily imply that they need maximize the dollar value of shares because there are other types of value that matter to shareholders (e.g. whether the corporation's outputs kill all humans, etc).

That said, an executive taking this approach would be taking on some risk with this approach as it's, er, not exactly guaranteed that a court would see things this way.

The fact that corporations happen to use dollars as a medium of exchange for shares of their ownership is a separate issue and not really relevant to the question of whether "shareholder value" can include non-monetary outputs.

Illustrating this point, I can imagine an organization designed to maximize the amount of tacos sent to its shareholders, and that manages the sale of its shares in donuts.

> Unfortunately, the current regulatory environment still makes this illegal/impossible, given that executives are still legally bound to create value for shareholders.

It's a myth that executives are legally bound to create value for shareholders.

From [0], "Directors and officers, broadly speaking, have a duty of care and duty of loyalty to the corporation. From that flow more specific obligations under Federal and state law. But notice: those responsibilities are to the corporation, not to shareholders in particular…..Equity holders are at the bottom of the obligation chain. Directors do not have a legal foundation for given them preference over other parties that legitimately have stronger economic interests in the company than shareholders do."

[0] https://www.nakedcapitalism.com/2017/02/why-the-maximize-sha...

Externalities are considered in shareholder value. It has never been just monetary, contrary to popular opinion.

How are externalities considered in shareholder value?

The thoughts and feelings of these CEOs mean a lot, because I am pretty sure that the current regulatory environment underdetermines the choices a corporation has (otherwise it would be General Councel and Compliance that runs companies).

So, CEOs can take externalities into account when making decisions within the legally feasible.

They don't. Some San Francisco new hires for JPMorgan get paid $86,000. This is criminally underpaid. Action matters. First hand source here.

Oh come on, that doesn't sound illegal. What do you mean by "criminally?"

It’s a common figure of speech. He/she is exaggerating.

If I want exaggeration I'll read Reddit. I come here for serious discussion, and exaggeration has no place in such.

If they want to make a real change, they can convert to cooperatives and commons trusts along the "Capitalism 3.0" model[1].

[1] -- http://peter-barnes.org/book/capitalism/