Why Shareholder Value Never Actually Mattered. William Michael Cunningham, Creative Investment Research

The Business Round Table (BRT), a group of the largest corporations in America, declared recently that "profits for shareholder are no longer the only purpose of a corporation." This profits-first strategy, known as “shareholder wealth maximization,” has been the guiding philosophy for much of American business since 1619.

It was always the wrong goal. Some, mainly those excluded from fully participating in the economy, knew this to be the case. Martin Luther King, in a sermon given on November 4, 1956, warned that "material means have outdistanced spiritual ends, that mentality has outdistanced morality, and that civilization has outdistanced culture." More specifically, King, in a September 1, 1958 essay, wrote that “We are prone to judge success by the index of our salaries or the size of our automobiles, rather than by the quality of our service and relationship to humanity.”

Even Robert F. Kennedy, the wealthy scion of an influential family, declared, at the University of Kansas on March 18, 1968, that for:

"too long, we..have surrendered personal excellence and community values in the mere accumulation of material things...Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.  It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts..the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play.  It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile."

As shown, Kennedy's comments had their origin in the Black Community.

Both men knew "maximizing only shareholder value" was never a reasonable goal. It was an excuse, and, by 1968, a response to increasing ethnic and gender diversity. It was an effort to keep "the other" out. It worked: "income inequality in the United States increased significantly since the 1970s."

More rational corporate goals, like "delivering value to customers, investing in employees, dealing fairly and honestly with suppliers, supporting communities and protecting the environment" may now become the focus of the competing, sometimes conflicting ambitions that corporate management will pursue. This requires maximizing social and financial return. We have shown, over 30 years, that it can be done. It is not, however, easy.

Given the extreme social volatility the US has experienced in the years following the financial crisis of 2008, (a crisis created, in part, by current BRT members), income inequality, and the hatred and instability it generates, will soon reach the point where they threaten the entire US economic system.

We can only hope BRT's change of heart is genuine, and that it is not too little, too late.

Time will tell.

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