Maximizing Shareholder Value: The Workaround from Bartley J. Madden

One of my favorite independent thinkers is Lynn Stout.  Last year I reviewed her excellent book, The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public, which makes the point that “U.S. corporate law does not, and never has, required directors of public corporations to maximize shareholder value.” I ended with the following:

I’d like to hear more from Stout on what should be done to incorporate prosocial needs into corporate governance. Don’t tell me self-selecting directors are blessed with a divine right to rule.

Bartley J. Madden has been thinking about these issues for some time. He recently released Wealth Creation: A Systems Mindset for Building and Investing in Businesses for the Long Term at Audible and more recently Management’s Core Responsibilities at SSRN. See also the News and Publications page at
In Management’s Core Responsibilities, Madden argues that rather than focusing on maximizing shareholder versus stakeholder values, it is more productive to avoid the language entanglements. Instead, he focuses on common ground concerning management’s core responsibilities.

Madden points to many problems that are too familiar to many, such as the inadequacy of current accounting standards in measuring when and how a firm achieves returns above the cost of capital but his main contribution in this area is to highlight management’s core responsibilities:
  1. Make the world a better place. We don’t live to eat; neither should we work just to make profit.
  2. Improve value stream efficiency. Any one decision by a firm that improves the entire value-stream efficiency is worthwhile even if the benefit goes solely to its end customers and/or suppliers.
  3. Reward long term shareholders through disciplined innovation attuned to the life-cycle financial variables that ultimately drive value (limitations of EVA are explained in a detailed Endnote).
  4. Pay for value created. Requires employees equipped to develop knowledge-base solutions, pushing decision rights down to those demonstrating the necessary skills, gain-sharing with value creators, and a culture of experimentation and fast learning.
  5. Promote free-market capitalism – competition stripped of cronyism. The enemy isn’t trade unionists but “executives in pin-stripped suits who extol the virtues of competitive markets with every breath while attempting to extinguish them with every action.”

I appreciate Madden’s quote from Ken Iverson:

The great and terrible irony of modern business is that so many managers feel overburdened with responsibility, while so many employees fee unchallenged and unfulfilled in their jobs.

Madden argues convincingly for a more balanced approach. If I’ve piqued your curiosity, there’s much more from this prolific thinker and practitioner at

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