Shareholder Primacy and Corporate Financialization

As Engelen (2008), Van der Zwan (2014) and Christophers (2015) indicate in their own distinctive theoretical contexts in reviewing the financialization literature, financialization studies emerged at a rupture in the history of capitalism when corporate governance at Anglo-Saxon firms had gone through a revolutionary change between the 1970s and 1990s. This has sparked off, from the beginning of the 2000s, a thematically coherent body of academic work from various disciplines on corporate financialization that critically engages with this discursive and political phenomenon in present day capitalism which has given us the neoliberal project of shareholder value maximization principle that is homogeneous as doctrine but inconsistent and heterogeneous as practice. Also commonly referred to as shareholder primacy, the shareholder value maximization principle advocates the idea that the purpose of the firm is to prioritize the financial interests of the shareholders, providers of capital to the firm. The purpose of the firm is a contested subject in corporate law studies and economics. The historic evolution of the owner-managed private firm to the professionally managed public firm has required the formulation of explicit corporate governance codes and principles that socio-economically organize the contractual relationship between owners (principals) and managers (agents). In this context a stakeholder perspective defines the purpose of the firm to equally serve employees, owners, customers, and the wider society. In the neoliberal era the shareholder value maximization principle has become the dominant corporate governance practice that has gained legitimacy through management education and consultancy recipes.