Shareholder Value Ideology

Shareholder value ideology is the normative framework that defines the corporation's purpose as maximizing returns to shareholders, with all other considerations—worker welfare, community impacts, long-term productive capability—subordinated to this single goal. The ideology emerged from Milton Friedman's 1970 essay declaring that business has no social responsibility except profit maximization and was formalized through Jensen and Meckling's agency theory, which reframed managerial autonomy as an agency problem requiring correction through shareholder-aligned incentives. Lazonick's research demonstrates that shareholder value maximization, far from producing the productive efficiency and innovation its proponents promised, has generated an extractive governance model: corporations distribute earnings to shareholders through buybacks and dividends, reduce long-term productive investments, downsize workforces to cut costs, and operate on quarterly time horizons incompatible with sustained innovation. The ideology persists not because it produces superior outcomes—Lazonick's data show it does not—but because it serves the financial interests of the executives, board members, and investors who control corporate governance. In the AI era, shareholder value ideology ensures that the most transformative technology in history