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November 21, 2016


Matt Moore

Chris, many of your proposals seem to require that businesses are not currently maximising shareholder value.

Why does the market for corporate control not function properly in this space? Specifically what features of the corporate institution?

After all, if you are correct, there's a lot of money left lying on the table.

gastro george

Because businesses are run by managers, so they are most likely to be run to maximise manager value?



The profit motive is just one among a host. Humans and organizations are complex. The profit motive probably isn't even in the top league - maintaning class/gender/race relations, cognitive biases, inertia, etc.

Matt Moore

@gastro george

If putting workers on boards reduces that problem, why aren't shareholders insisting on it?

gastro george

@Matt - To complement what ADC says, it probably depends if you are talking about short-term and long-term shareholder value. Manager value and short-term shareholder value will often coincide, but that may not be in the long-term interest of the company.

Then ask yourself why worker representation is normal in Germany.

BTW, Chris, I've just been listening to some nonsense on Radio 4 that one of the reasons that May is turning away from worker representation is that it's become clear that this might be difficult in UK law - due to the legal requirement to maximise shareholder value. Isn't this just hogwash?


Gastro george:
If it is a legal requirement to maximise shareholder value, the short answer is change the law...that's what governments do. The long answer is define "shareholder value", is it short, medium or long term value?

gastro george

@AndrewD - that was my thought exactly.


@gastro george

Yes that's a pretty poor argument. There isn't a legal duty to "maximise" anything. Existing directors' duties require execs to promote the success of the company for the benefit of the members (NB- not "owners") but with regard to factors including the interests of the employees.

Section 172 here:

gastro george

So it's hogwash and the Radio 4 "journalist" just bought it. How unpredictable.


@matt. I think it's chiefly down to classic agency issues. Firstly the major shareholders may be gambling with other people's money, secondly the management of listed companies only need to maintain the support of enough of those people gambling with other people's money.


@ Matt Moore, as a shareholder, I would be perfectly happy for workers to be represented at the board (but not control the board). I am not sure if this would necessarily enhance shareholder value, but I doubt it would lessen shareholder value. So I would not insist on it, but would certainly support worker representation.

More generally, there are many things that ought to be done but not necessarily with a view to enhancing shareholder value. If it contributes to worker wellbeing, that seems sufficient reason for worker representation.


Workers conduct their lives on the basis of their stream of income, and one tends to think, its PV. However firms own the duration of the stream, not the workers, as generally they do not have long term contracts. Having worker directors would transfer some of that ownership back to workers.

An entire board of workers would be interesting, as it seems such a board would only consider projects beneficial to workers and reject projects only beneficial to finance capital.


IIRC, long ago Peter Drucker wrote that when Alfred P. Sloan retired from General Motors, he told Drucker that by far the best qualified person to take over would be Walter Reuther, the President of United Auto Workers - but neither the shareholders nor the board nor the union would have allowed it.
So they got a series of second-rate hacks instead.


Or is this just post truth in action? The tendency for actions to be divorced from words spoken before hand?

No politician will be expected to keep any undertakings any more?

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