The ideology of “shareholder primacy”—the belief that businesses function solely to profit and “maximize value” for shareholders—has had a profound and toxic effect on our economy. Corporate executives used to, in large part, manage companies for the long term, workers had more bargaining power and greater economic security, and the economy was more dynamic. Today, however, the balance of power among the various corporate stakeholders has shifted in favor of CEOs and shareholders who prioritize next-quarter’s share price at the expense of all other corporate stakeholders, particularly workers and consumers.
We cannot address this power imbalance that undergirds our high-profit, low wage economy without first identifying who shareholders are, how they behave, and what this means for broader economic outcomes. In Who Are the Shareholders?, Roosevelt Fellow Susan R. Holmberg examines them through three dimensions: their identity—who shareholders are in terms of demographics (predominantly wealthy and white households); their role—which challenges mainstream assumptions that shareholders are owners of the corporation and that they provide the majority of firm financing; and their power—the outsized influence a subset of shareholders, predominately hedge funds, have over corporate decision-making by CEOs and boards of trustees.
The late, great legal scholar Lynn Stout (1957-2018) made a crucial point about shareholder primacy: We can’t dismantle it without first understanding the complex nature of shareholders and the impact they have on our economy and society. In order to create good jobs, raise median wages, and, more broadly, address economic inequality, including racial inequality, we must dismantle shareholder power. By fostering countervailing worker power and establishing rules that rectify corporate behavior, we can build long-term, inclusive economic growth and also ensure that all stakeholders, especially working families, benefit from it.