In Defense Of Putting Profits Forward

In the face of the rising popularity of stakeholderism, Professor Stephen Bainbridge has determined to "stand athwart the tracks of corporate governance and yell 'stop' as the stakeholder capitalism train pulls out of the station".   He is doing so in his recently published book, The Profit Motive: In Defense of Shareholder Value Maximization, and in this recent blog post.  According to Professor Bainbridge, three themes animate his defense of the profit motive:

First, any conception of corporate purpose that embraces goals other than creating value for shareholders is inconsistent with the mainstream of U.S. corporate law.  Second, directors do—and should—have wide and substantially unfettered discretion as to how they go about generating shareholder value.  Although many commentators claim that those statements are inconsistent, in fact they both reflect fundamental normative principles deeply embedded in U.S. corporate law.  Third, a shareholder-centric conception of corporate purpose is preferable to stakeholder capitalism.

He also argues that stakeholderism creates a conflict of interest by providing a cloak for directors pursuing selfish interests.  One of those selfish interests is virtue signaling at the stockholders' expense.  Directors may well enjoy enormous psychological and social benefits from plaudits for decisions that play to the crowd's, rather than the owners', self-interest.