I'll echo Christine's sentiments: I am thoroughly enjoying this symposium on Religious Faith and Corporate Law. While it's sparked a lot of questions for me, I'd like to focus on a point that Lyman made: different organizations have different goals. Lyman observes that the “monistic view that all companies all the time must have the same and singular goal, i.e., to maximize profits or the share price” is “not mandated by law but it is a custom, constrained by markets to be sure, and it grows out of business lore and business norms and business education.”
That is, belonging to a corporation does not mean one must value share price above all else, any more than belonging to a religion requires one to ignore traditional corporate goals. The two sets of values can co-exist along a "continuum of companies on the profit side." But this concept is not merely aspirational. I suspect, as Lyman posits, that real-world companies currently pursue all sorts of different goals—even despite corporate scholars telling them for the past two decades that all they should do is maximize shareholder value.
My current work involves some of the how and why these diverse goals exist, and their effect on the form of entity. That is, to what extent do Google shareholders purchase shares based upon their desire to “belong to” or “express” the values adopted by Google? How does this relate to the feeling one gets by donating to NPR or buying coupon books you don’t really want from local schoolchildren?
If one starts from the premise (which I’ll expand on in a future post) that, practically speaking, the line dividing for-profits and non-profits is wafer thin, then the situations might be more closely related than one might think. At some point on the continuum towards non-wealth-maximization goals, most entities opt for non-profit status. But I’m working towards an argument that that choice, the organizational form choice, fulfills a largely expressive and not substantive function.
Thoughts are welcome, on-line or off.
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8345157d569e201157072c174970b
Links to weblogs that reference Vive la Corporate Différence:
1. Posted by The Divagator on May 6, 2009 @ 13:56 | Permalink
Interesting premise right from the beginning: is "maximizing profit" the same thing as "maximizing share price"?
Seems that we could have a far more robust concept of what "profit" is, whereas "share price" is a pretty static concept.
2. Posted by Lyman Johnson on May 7, 2009 @ 9:40 | Permalink
Usha,
Well said. I think many of us who are able(many, of course, do not have such choice)do choose as consumers and workers to associate with companies that meet other goals/values besides money-maximizing. I think the more people think this is appropriate--this is why ideas matter--the more likely it is that behaviors will continue to change. I also think that when we fight through this recession that young people with education and talent will be very picky about where they work and shop.
3. Posted by geoff on May 12, 2009 @ 11:19 | Permalink
There are so many problems with this, but none of the problems or discussions are new--this has been a discussion in the literature since at least the Dodge brothers came on the scene. I won't belabor the points. But I will ask one question: When companies pursue non-wealth-maximization goals, how much does that magnify (or permit to be magnified) agency costs, and are you comfortable with this? Your reference to nonprofits is telling: agency costs are a huge problem in nonprofits, especially over the long term, precisely because serving non-wealth-maximization goals is so susceptible to abuse. See my article on agency costs and charitable organizations.
4. Posted by Lyman Johnson on May 12, 2009 @ 16:37 | Permalink
Geoff's comment uses the rubric "agency costs" as an economics term that beguilingly implies that business decisions do not have a moral dimension. But they frequently do, and that is when moral philosophy or religion or other guideposts come into play to aid economics. The alternative--also a moral choice in disguise-- is to prefer shareholdwers, a moral choice that Geoff prefers but not one mandated by law or other authoritative source.
| Sun | Mon | Tue | Wed | Thu | Fri | Sat |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | |||
| 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 19 | 20 | 21 | 22 | 23 | 24 | 25 |
| 26 | 27 | 28 | 29 |
