Corporate Governance - What do shareholders really value? (LECTURE ONLY)

[@stevencolatrella6424]

Lynn Stout passed away last year. But she won - today, just a few days ago, the coronavirus relief act was passed by Congress with restrictions on companies buying back shares of their own stock, and just last year CEOs of hundreds of major companies announced that shareholder value is not the main priority for running companies. Certainly, we need to see them walk the walk and not just talk the talk. But today we know, and no one doubts that Prof. Stout was right, was warning us about what was wrong, and was a prophet of where we were headed. We owe her a great debt.

[@geoffjs]

As articulate as she is, what she says is simplistic. Shareholder value can only be created over the long term if the interests of the stakeholders ie staff, customers & suppliers are satisfied. By linking bonuses to value creation, employees are encouraged to think & act like owners.

[@benlau4026]

Just found this as part of external search for good reading on my LLM, she was brilliant. Very sad to find she had passed in 2018.

[@MartinMcNeil]

That's a shame - Stout clearly had a passion for the topic, and that's an essential part of taking a n otherwise dry topic and get people to enthusastically engage with it.

[@lilmoesk899]

this woman is smart. great speaker. wish she were my corp law professor!

[@afaqueahmedkalwar5278]

She has you , didn’t you learn anything from her !

[@richardsonshambare6978]

In a way, @Travis, she is. Our professors open our minds - Prof. Stout has definitely opened our minds

[@rurikmckaiser543]

I really like the way in which Prof Stout emphasizes her passion for business and how she understands the way the public company should be governed.

[@lj5116]

I took Friendman's Ideas to heart for years of my life, and I wish I hadn't, he wanted a world where everyone was an autonomous individual except for his group. That was his motivation.

[@xavierrodriguez7452]

I completely agree. Shareholders are just people that participate in a contractual relationship between the corporation and their shares. Even during liquidation, shareholders get the residual. The corporation is the principal and the holder is the agent. Theories can be proven wrong!!

[@letenahejiguwale]

This thought makes my head u turn. The way we are thought in that shareholders are principals and boards are agents is nullified in practice. Worse than this the real principals are management and boards are agents. Reality is opposite to what is taught at classroom. OMG.

[@NalinPasqual]

Different explanation and a critical analysis of shareholder value maximization that we can not hear from other scholars.

[@gilgamesh310]

What I find most silly about the whole need to maximise shareholder value, is that the shareholders often don’t give a shit about the profits of the company. They could be doing really poorly and still have a high stock value, (Tesla) or have gone through a period where they made huge profits but the stock price barely budged(Google). Private companies tend to be a lot more beneficial to society than public ones. The only thing is, joint stock operations have existed for centuries, so it’s hard to ever see public corporations not being a thing.

[@logannyasulu9960]

She is brilliant and inspires a different way to look at these issues.

[@dexteremrit3130]

SUPERB, BRILINAT, ARTICULATE, PRACTICAL!!!!

[@ayjay10016]

So much is wrong with the current world of human beings and all of that crap is right in front of each and everyone of us to correct. We however bump around like zombies - looking blindly for our next bite! Lynn Stout Kudos!

[@budnatali7446]

Beginning in 2000 BP initiated a massive investment in CSR ($200+ million), visually rebranding themselves as a clean and good energy company. The 2010 gulf disaster was a direct result of cutting operational cost in favor of crafting a massive marketing 'green veneer' and a diversion from their actual performance while attempting to profit from the CSR craze (ongoing to this day). Their responsibility is to being the best oil company they can be (which includes safety and environmental compliance) and rejecting virtue marketing campaigns. Better for shareholders and stakeholders alike.

[@TheBuccaneerEngineer]

Nice speech! I’d agree- the purpose of a corporation shouldn’t be maximization of shareholders value but should focus on the long term interests of all stakeholders including customers, employees, suppliers as well as shareholders and communities 😊

[@paularodriguez4600]

I really enjoyed this lecture. Brilliant.

[@Thegrumpycoach]

3:00 - 4:15 ''... and finally, obviously very bad for the gulf eco-system'' - Her structure of importance defines her views/beliefs (emphasis added)

[@charlesfred6679]

I think if you use the word sustainable shareholder value (ie in your dynamite fishing example )it becomes more apparent that viewing shareholder value over the long term benefits the corporation along with its equity holders. Short term measures for value increases , generally only yield short term gain with long term losses! Charles Cox

[@wdmv]

I don't know how it is in other countries, but here at my university it is a standard to teach both models.

[@a_little_bit_of_wisdom]

Prof. Stout's goal is governance. She doesn't slander Friedman - his rhetoric was extreme, including "shareholder value". Her sociology of economists and biz consultants is accurate. But how does it distort governance? BP's safety problems are attributed to corp culture. So Stout's idea may be that a focus on increasing share price creates certain cultures. Does governance create culture? If so, there must be a lag - culture evolves from the past. Corp cultures absorb the world outside, too.

[@zuzolesingiswa]

The easiest way for a company to maximize profit is to reduce expenditure, as increasing revenues is more difficult - by cutting the wage bill through job cuts and by reducing capital expenditure by minimizing investment. Generating higher profit, however, is only the beginning of shareholder value maximization. The maximum proportion of the profit thus generated needs to be given to the shareholders in the form of higher dividends. Or the company uses part of the profits to buy back its own shares, thereby keeping the share prices up and thus indirectly redistributing even more profits to the shareholders (who can realize higher capital gains should they decide to sell some of their shares). Share buybacks used to be less than 5 per cent of US corporate profits for decades until the early 1980s, but have kept rising since then and reached an epic proportion of 90 per cent in 2007 and an absurd 280 per cent in 2008. William Lazonick, the American business economist, estimates that, had GM not spent the $20.4 billion that it did in share buybacks between 1986 and 2002 and put it in the bank (with a 2.5 per cent after-tax annual return), it would have had no problem finding the $35 billion that it needed to stave off bankruptcy in 2009. And in all this binge of profits, the professional managers benefit enormously too, as they own a lot of shares themselves through stock options. All this damages the long-run prospect of the company. Cutting jobs may increase productivity in the short run, but may have negative long-term consequences. Having fewer workers means increased work intensity, which makes workers tired and more prone to mistakes, lowering product quality and thus a company’s reputation. More importantly, the heightened insecurity, coming from the constant threat of job cuts, discourages workers from investing in acquiring company-specific skills, eroding the company’s productive potential. Higher dividends and greater own-share buybacks reduce retained profits, which are the main sources of corporate investment in the US and other rich capitalist countries, and thus reduce investment. The impacts of reduced investment may not be felt in the short run, but in the long run make a company’s technology backward andthreaten its very survival.

[@alvinjacobsblydenstein7948]

this is not talked about enough, great talk.

[@emmanuelkatana6220]

She makes a lot of sense.. Thanx

[@petrhorak931]

Great speech and interesting point of view.

[@sacredfresno4253]

Greetings, it brings me favorite joy to have found your recordings of what your opinion is about your life. I'm not going to be rude. I'm not going to be rude. I'm going to say I'm pleased with this life. Where there's opulent answers for everyone and nothing will change flamboyant evil, but I understand it beyond the way you think. In the name of my holy blood given to me by my brother, Jesus. I thank you for showing your characters. Without heavely council.Not that anyone in that room think cares at all about what heavenly father Jehovah says. ANYHOW, I'm going to tend to my black catand hope that God gives me the gold. Because I understand what love is you clearly. Don't an intercessor is what I am and I will use your group for prayers in the hopes. You see the light and are saved from your hell. Dancing around your head. God bless you and Jesus name. I've got to tin to my poor sushi. Probably dying from something you did anyhow.God bless all in jesus' name and let us say a man together one day soon.

[@syediqbal8197]

so good n realistic thinking of Prof Stout..I fully agree with u

[@kiptonhamilton2170]

In February 2019, an Argo shareholder issued a press release in which it alleged, among other things, the misuse of Argo assets by Watson, including undisclosed personal usage of corporate aircraft. On April 12, 2019, during a proxy contest with this shareholder in connection with Argo’s May 2019 annual shareholders meeting, Argo filed a definitive proxy statement that failed to disclose over $1 million worth of perquisites, including over $230,000 related to Watson’s use of corporate aircraft. From 2015 through 2019, Argo incorporated its definitive proxy statements into its annual reports by reference. From 2014 through 2018, Argo incorrectly recorded payments for the benefit of, and reimbursements to, Watson as business expenses, and not compensation. As a result, its books, records, and accounts did not, in reasonable detail, accurately and fairly reflect its disposition of assets. In addition, Argo failed to devise and maintain internal accounting controls relating to payments for the benefit of, and reimbursements to, Watson that were sufficient to provide reasonable assurances that transactions were recorded as necessary to maintain the accountability of assets. These failures included, for instance, a practice of providing expense reimbursements to Watson without requiring an adequate explanation of a business purpose for the expense, allowing Watson to approve his own expense reimbursement. Mr. Watson's Personal Chariot Make: Gulfstream: 5 Registration Number: N17ND Serial Number: 518 Lessor: Jetaway Air Service of Muskegon, MI Monthly Payment: $ 175,000 Hourly Reserve Payment: $ 1,250 Average Monthly Payment to Jetaway Air Services (based on recorded flight hours) $250,000 to $300,000 (note: figure does not include crew salaries, airport fees, insurance, and fuel) 4 to 5 million expensed to Argo shareholders each year for the exclusive use of Mark Watson's Personal Chariot - G5.

[@promotionmechanization]

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[@gilgamesh310]

I think the C-Suite controls the corporation more than the board of directors. The board of directors mostly just oversee what goes on.

[@drimanmostafa4484]

listen to this

[@Questington]

wow. this is quite interesting. Though the law is not always right. Maybe the law should be changed so that corporations are not people, but instead are entities owned by shareholders.

[@carolineday8321]

does anyone here know what to do when a major share holder of family pty ltd dies and the remaining director puts all share holders shares into his own name sells the home unit and claims insolvency in the same week and runs off with the $130,000. what would be the cause of action in federal court? australia

[@milanpaudel9624]

legal representative of that share holder family should get the position of shareholder. May be court gonna make director return all those shares .

[@carolineday8321]

don't have $40,000 legal rep fees. court rejected files, incorrect format? need correct cause of action. he has moved that pty ltd money overseas I think

[@milanpaudel9624]

The name of corporation is Pty ltd right ? Its public company, why didn't anybody oppose director to do that shit. Even registrar of company didn't do anything ?. And if director flew overseas, there is nothing to do unless he can be find out. Going through court takes long time and hefty sum of money gonna be used. Stay strong.

[@carolday8432]

+ßLÀCK ÇAT Pty ltd 059065833 is a family Pty ltd that owned the family home. my dad went into a coma, my brother removed me as director. when dad died, Michael sold the home and took off

[@JoePerdue]

this whole time i thought i was crazy for thinking my corporate finance textbooks made no sense...

[@letenahejiguwale]

She blew corporate finance totally

[@takalanifunyufunyu6253]

it blow ur mind

[@ThaFacka]

thank you

[@richardwebb6054]

anybody know what the study referred to at 5:50 was?

[@jaan45]

Great arguments and an impressive performance. The boys look so beaten.

[@samuelchen5909]

I disagree with the idea of principle is created after the agent as she mentioned. Corporation is found by the entrepreneurial, the prospectors. They have the initial right to hire which agent to be hired as part of corporation.

[@edyonce89]

i totally agree with you

[@hamwenxuMisszoe]

Appreciated

[@peteronyangoonyoyo7552]

This is really cute and worth watching lecture.

[@tetleydidley]

this woman believes that since a corporate charter does not mention shareholder's wealth maximisation as an objective (among other nonsense about obiter dicta, etc), therefore, corporations have no legal responsibility to do so. the purposes clauses state the means by which shareholder wealth is to be maximised (e.g. rental of buildings, manufacture and sale of bread, etc.). These clauses are not ends by themselves as the woman would suggest.

[@edrisboedrisbo]

What is the return for Shareholder ? Are they sharing expenses ? If they do not care about the companies what they are doing ,so we should not called them "shareholder " . I might have missed understand ,however I am thinking about the relationship among Shareholder ,Corporate Governance and society who is going to judge who!

[@anthonia2012]

Most of us aren't psychopaths .... mwah haha!

[@tetleydidley]

"they leverage up their firms... with the assurance that if things go very poorly indeed, much of the loss would be borne by the bondholders,..., by the employees,..., but not ultimately by the shareholders themselves..." such nonsense. shareholders would be compensated last if a company goes insolvent/bankrupt. employees usually first. ever heard of the creditor hierarchy? the problem of over-leveraged firms cannot be explained by the shareholder value model!

[@prakashwillrocku]

❤❤❤

[@johnmartin4641]

If us shareholders cared about anything other than shareholder value, we wouldn’t invest, we would donate that money to charity instead. We invest to maximize our wealth. What alternate reality does this woman live in?

[@gilgamesh310]

She was making the point that it's better for us in the long run if a company didn't focus so much on quarterly returns. Most people who invest expect the share to increase years down the line, not in a few months.

[@stephen_pfrimmer]

3 mos from now?

[@tetleydidley]

you are wrong when you say it was the focus on shareholder value that drove BP to cut $1m a day on safety expenditure - because the cut could result (it did) in eventual loss of wealth. It's more of a breakdown of the agency relationship, where managers think short term - possibly due to their remuneration model. I don't see how a sensible principal with enough technical background would have taken that cut.

[@scottishfoldcat_orionotis6746]

With my practical experience who used to work for oil and gas, what she said is close to the truth. Either that is safety cost or profit. They cut they cut, not think of long or short- term. Honestly, the agency is just an excuse.....The academic view could argue such way.

[@tetleydidley]

Woman's Premise 1: economists and legal scholars cannot find evidence to prove that corporations running on the platform of shareholder's wealth maximisation provide most value to shareholders, never mind anybody else Woman's Premise 2: I have no evidence for my own assertions either Conclusion: therefore, shareholder value model hurts everyone and my theories work best.

[@hello-world1]

shareholder is a fiction 🤣

[@viewerpet12]

Wrong, she confuses too many of her own opinions and speaks as if they are somehow fact. For example she tells of Friedman's idea of shareholders owning the corp. is why investments in corp, has taken on a new meaning today from what it meant in the 1950's. As she states -she can't prove it. She does not talk about many direct influences that anyone can prove but falls back on the flimsy excuse that it was an ideology when in reality she's doing what most professors do----nothing

[@tetleydidley]

the woman goes on slandering milton friedman for the shareholder value model that she had falsely framed. this entire lecture is just filled with strawmen. short term thinking is not a premise of the shareholder value model.