Who are companies for?

The Extinction Rebellion protests, which brought busy road junctions in London to a standstill this Spring, are among a number of events erupting from the politically frustrated margins.

Anger is bursting through across the political spectrum from the Gilets Jaunes, Brexit, Bolsanaro, Duterte and Trump and while their analyses are quite different, these diverse movements are often angry with big business. In many eyes business serves business, takes short term views, enriches a global wealthy elite and doesn’t serve wider stakeholders in society.

How can trust be regained? Does a company run for its shareholders need a fundamental overhaul?

Alex Edmans, LBS Professor of Finance and Academic Director of the CCG, argues the debate should not be hijacked by caricatures of big business and ill-informed solutions, but draw upon the best research. He has argued that business can take into account all stakeholders in a way that does not eschew profits. A profitable company can grow returns for shareholders and wider society.

Shareholder wealth maximisation

Diane Denis, Katz Alumni Chair in Finance, University of Pittsburgh, argues that there is less difference between shareholder wealth maximisation and maximising benefits for wider society than commonly thought. In fact by using shareholders’ interests as a decision rule is a good way of protecting the interests of all stakeholders.

“I would argue there's a lot less conflict between those models than people realise,” she says. “I don't think that the goals of the corporation and the good of the society are in conflict all that often.