ABSTRACT
What is the goal of a corporation? The goal of the company may seem clear—to benefit the company. However, two different approaches have emerged in the past few decades. One camp, based primarily on bankruptcy laws and cases, argues that when companies are being dissolved and sold for parts, those in charge (the board of directors) must make decisions that are in the interests of the company’s shareholders. The chapter summary provides the classic reading used for the focus on shareholder wealth maximization—Milton Friedman. However, shareholder wealth maximization (aka profit maximization) turns out not to be a helpful way to manage a company (i.e., Enron, Purdue Pharmaceutical, etc.). The three readings included here offer explanations as to the purpose of companies and responsibilities of managers. Within the view that the purpose of the corporation is to create value for stakeholders, the criteria for projects is broader and more long-term. Readings include R. Edward Freeman on stakeholder theory and Lynn Stout on the different legal justifications for the purpose of the company. The related case for these readings is on the use of emotion recognition programs. Robert Frank is included on how companies can benefit from acting responsibly and the related case written for this book is “Recommending an Insurrection: Facebook and Recommendation Algorithms.”
