Shareholder Value, Emerging Economies and the Need to Reconcile the Corporate Objective with Sustainable and Inclusive Goals

The years preceding the wave of US corporate scandals in 2001/02 showed a high degree of convergence of theories and practices of corporate governance at the global level. The convergence corresponded with the perceived supremacy of the business model adopted in the US and UK based on shareholder value, and the overall reliance on market mechanisms for the regulation of corporate governance.
While the corporate and financial scandals that occurred over the past fifteen years contributed to stir academic debates over the validity of the shareholder value paradigm, the business model centred on the pursuit of share value for the benefit of stockholders has remained the guiding criteria of corporate success. This has resulted in institutional arrangements whereby corporate activities have promoted the interests of one constituency – shareholders – ahead of other key social and economic concerns. In the context of emerging economies this problem is accentuated, because the privatisation of large utilities and natural resources companies has attracted foreign investors whose interests are not naturally aligned with local and environmental priorities.
This chapter reconceptualises the critique of shareholder value in light of the specific context of emerging economies. It focuses on the necessity to take account of the different nature of large corporations that, due to their activities and externalities, affect the interests of a wide range of societal interests. The chapter proposes a new institutional framework for the specific regulation of the corporate objective of large public firms.