The Case for Shareholder Capitalism

McLean, a finance professor at Georgetown, defends shareholder primacy as the better account of what a firm owes society, against the stakeholder model associated with Klaus Schwab and the World Economic Forum. His argument runs in three parts: lay out the institutional plumbing of capital markets and the basic finance, show that maximising long-run shareholder value already requires satisfying employees, customers and suppliers, and then argue that corporate social responsibility substitutes unaccountable managerial discretion for the democratic process that should be setting policy. Externalities, on his account, are a job for regulation, not for boards.

Why it’s on the list: The strongest short statement of the shareholder-primacy side of an argument that mostly gets conducted by its critics — worth reading against the stakeholder-capitalism material already in the wiki.

Where I saw it: Michael Mauboussin’s favourite books of 2024, posted December 31, 2024.

Connections

• Capital Allocation — the portfolio idea this belongs to: whose claim on the cash flow, and on what theory.
• Stakeholder Capitalism · ESG — the positions the book is written against.
• Corporate Governance · Capitalism — the machinery and the system under discussion.
• Milton Friedman — the shareholder-primacy tradition McLean is extending.
• Michael Mauboussin — the curator whose 2024 list this came from.