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The Magnitude of Shareholder Value as the Overriding Objective in the UK - The Post-Crisis Perspective / Shuangge Wen

Journal of International Banking Law and Regulation, Volume: 26, Issue: 7, Pages: 325 - 338

Swansea University Author: Shuangge, Wen

Abstract

In light of the vivid dynamism of corporate governance practices, a debate concerning the purposes of the corporation has been raging, particularly since the onset of the global financial crisis. This debate has concerned whether shareholder value should continue to take precedence in the UK – a lea...

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Published in: Journal of International Banking Law and Regulation
Published: Sweet & Maxwell (ie Thomson Reuters) 2011
URI: https://cronfa.swan.ac.uk/Record/cronfa7103
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Abstract: In light of the vivid dynamism of corporate governance practices, a debate concerning the purposes of the corporation has been raging, particularly since the onset of the global financial crisis. This debate has concerned whether shareholder value should continue to take precedence in the UK – a leading country using the Anglo-American corporate governance system. Providing insight into the future direction of Anglo-American corporate governance practice, this article seeks to identify the magnitude of the predominant objective for corporations – the shareholder value paradigm – in light of the recent global financial crisis, and the possible future development of the paradigm. Significantly, the discrepancy between short-term and long-term consideration of shareholders’ interests will be explored. It will be recognised that the scope of the shareholder value paradigm is not limited to short-run profit chasing. Shareholder value is not, as argued by some scholars, a key factor contributing to global turmoil. Rather, understatement of long-term concerns by businesses, and their narrow pragmatic preference for short-termism in interpreting shareholder value, are among the causes of the global crisis. In light of relevant corporate theories, the rationale behind shareholder value in the post-crisis context is justified on the basis of its strength in minimising principal-agent diversity and restoring investors’ confidence.
Keywords: Corporate Governance; Shareholder Value; Financial Crisis
College: Hillary Rodham Clinton School of Law
Issue: 7
Start Page: 325
End Page: 338