Future generations will wonder in disbelief how an economist could promote the idea that the “social responsibility of business is to increase profits”.
That’s like a doctor advertising cigarettes.
Tomorrow’s economists will describe shareholder primacy as the deadliest of ideas. Their students taught that at the start of the 21st century, despite all evidence of the damage it was causing to society and the environment, generations were taught that it was right to maximize profits.
And like the risks of smoking, they will learn that there is more to self harm than simple ignorance. Behind the ubiquitous idea that the purpose of a corporation was to maximise shareholder value was an obscenely successful twelve step marketing campaign.
Through reverse engineering, the talking points of profit maximization can be deconstructed to reveal the design and architecture of the strategy hidden in plain sight:
Get Them Young
Teach business students that the goal of business is to maximise shareholder value.
Stay On Message
Mould public opinion by repeating the three core messages of shareholder value consistently throughout the media and across all platforms:
shareholders are owners | directors are agents | profits are good for society
These supporting messages reinforce the central soundbite of shareholder primacy - maximize shareholder value.
Win Their Hearts
Associate shareholder value with broader societal values - democracy, property rights and accountability.
Play Mind Games
Use psychological techniques to promote the goal of maximising shareholder value and suppress discussion of alternatives.
Lose Their Minds
Activate shareholder friendly scholarship. Exploit blind spots in academic literature and ethics.
Exploit a Little Truth
Imply that investors bankroll capitalism when nothing could stretch the grain of truth further.
Argue that because shareholders own something that means they own everything.
Make it Personal
Create the impression that shareholders are human when the overwhelming number are corporations that buy and sell shares as a way to make profits.
“mum and dad investor” is code for very large corporation.
Change the Law
Change the law to give the investment industry a competitive advantage over other industry segments
Re-frame the Problem
Engage in rhetorical re-framing. Position shareholder value as the solution to the problem caused by profit maximisation. The long-term value discourse is one example of reframing the problem.
Likewise, Michael’s Porter’s idea of shared value smells a lot like those cigarettes that were advertised as “light”, or “mild” to give the impression of a healthier alternative.
Divide and Conquer
Pit managers and directors against each other. A central device in profit maximisation is to keep the Board and management separate.
Open New Markets
Encourage investment industry serving "good governance" in new and emerging markets throughout the world.
Use Fear as a Last Resort
Create fear that if companies act in anyone but the shareholders' best interest, capitalism will collapse.
Sadly, smoking and maximizing profits have more in common than just an effective marketing campaign. Shareholder primacy is the cause of the corporate equivalents of cancer and mental illness- decapitalisation and cotard’s syndrome. But, unlike the doctor who promoted smoking in the 1940’s, the economists not only promoted the idea that the social purpose of the corporation was to increase profits, they manufactured it and groomed generations of business leaders.