Institute for Enterprise Ethics
LinkedIn YouTube Facebook The Discussion - IEE Blog
Institute for Enterprise Ethics The Discussion
The Discussion

The Discussion

Skip Navigation Links.

How Wall Street Bent Steel

Dec 11

Written by:
12/11/2014 11:19 AM  RssIcon

By Dan Sweeney
Director, Institute for Enterprise Ethics

Institute for Enterprise Ethics | How Wall Street Bent SteelOn Sunday, December 7, the New York Times ran a lengthy article with the above mentioned title detailing how an activist investor forced a publicly traded but family dominated steel company to split up into two public companies and put an entire city at risk. The board said they had no choice because “If the number is big enough the board is going to have to look at it and say ‘Ugh, OK….’ We are a publicly traded company.”

Nelson Schwartz, the author of the article went on to say “As in all publicly traded companies Timken Steel’s board and top executives have a fiduciary duty to shareholders to maximize both profits and investor  returns.” 

But this is not so. According to Lynn Stout, the Distinguished Professor of Corporate and Busness Law at Cornell Law School in her book The Shareholder Value Myth. Neither Federal law, State codes and statutes or state case law contain any provisions mandating the primacy of shareholder value over any other goal of a corporation.

“The notion that corporate law requires directors, executives, and employees to maximize shareholder wealth simply isn’t true. The idea is a fable.” (p. 24)


“Judges may say different things about what the public corporation’s purpose may be, but they uniformly refuse to actually impose legal sanctions on directors or executives for failing to pursue one purpose over another. In particular, courts refuse to hold directors of public corporations legally accountable for failing to maximize shareholder wealth.” (P.29)


“As far as the law is concerned, maximizing shareholder value is not a requirement; it is just one possible corporate objective out of many. Maximizing shareholder value is not a managerial obligation, it is a managerial choice.”


So when presented with a choice between taking even a high price for the company’s shares or protecting the income and jobs of their employees, protecting the businesses of their local vendors and supplier, protecting the livelihood of many, many other local businesses that live off the spending generated by the company’s payrolls, investing in state of the art capital for long run sustainable economic performance, investing in the quality of life of the local citizenry in the form of education and cultural facilities, the board of directors should not  have taken the excuse of law or regulation. They should have remembered that their responsibilities lie not to the wealth of their shareholders, but to the long run benefit of the corporation. They should have shown more steel themselves and struck a much, much better bargain for the corporation. 

Location: Blogs Parent Separator The Discussion

14 comment(s) so far...

Online Cake Delivery

You can also buy all flavors cakes from here with free home delivery.
Midnight Cake Delivery
Birthday Cake Delivery in Noida
Valentine Flowers

By Online Cake Delivery on   11/27/2016 10:55 PM

Re: How Wall Street Bent Steel

Occasions Made Special with Online Cake Delivery at Midnight.
Online Cake in Delhi
Online Cake in Noida
Online Cake in Faridabad

By Online Cake Delivery on   11/27/2016 10:56 PM

Online Cake Delivery

Enjoy the best cakes delivery in the comfort of your home.
Birthday Cake Delivery in Gurgaon
Valentines Day Gifts 2017

By Online Cake Delivery on   11/27/2016 10:56 PM

Online Cake Blog

Sweet as the Moment When the On the Cakengift Cake & Flower Services:-

By Online Cake Blog on   1/7/2017 4:29 AM

Order Cake in Delivery Blog

A Smooth-Running On the Cakengift Cake & Flower & Cake Services:-

By Order Cake in Delivery Blog on   1/7/2017 4:33 AM

Re: How Wall Street Bent Steel

Hurrah! At last I got a website from where I know how to truly obtain helpful data concerning my study and knowledge.

By Female Call Girls in Delhi on   1/31/2017 1:44 AM

Re: How Wall Street Bent Steel

Hi admin
I examine your blog it provides amazing information and i enjoyed reading this post. daily latest news in urdu
You can see all the latest urdu news i hope u will visit

By daily latest urdu news on   5/25/2017 12:24 PM

Re: How Wall Street Bent Steel

Glad to see your post, and hope things improve so we get some more posts to read!

By Ayesha on   6/15/2017 12:19 AM

Your name:
Your website:
Add Comment   Cancel 
© Copyright 2011 - 2017 University of Denver, Daniels College of Business. All Rights Reserved.
Rock Solid Design