Analyzing Shareholder Value: A Summary & Critique of the Article

This essay summarizes and critically evaluates an article focusing on shareholder value and corporate governance. The article emphasizes the importance of a governing objective in organizations for effective corporate governance, aiding stakeholder assessment and capital allocation. It contrasts the shareholder value maximization approach, common in common law countries, with the stakeholder interest balancing approach prevalent in civil law countries. The essay highlights the article's strengths in discussing stakeholder value maximization and governing objectives, while also addressing limitations concerning the feasibility of incentive schemes. It integrates additional research to support the argument that companies should balance shareholder value with stakeholder interests, stressing the importance of managerial decision-making transparency. Desklib offers more resources on this topic.

Running head: BUSINESS INSIGHTS - ARTICLE SUMMARY
BUSINESS INSIGHTS - ARTICLE SUMMARY
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1BUSINESS INSIGHTS - ARTICLE SUMMARY
The governing objective, one of the major building blocks of a business organization,
helps in the development of the choices, communication and the culture that is implemented by
the concerned business organization as well as assists in the allocation of the capital within the
organization. The following paper attempts a summarization of the major arguments that have
been put forth by the authors of the article. The paper opens with the summarization of the
arguments that have been put forth by the authors in the given article. The paper nears the
conclusion with a critical evaluation of the arguments presented by the authors.
Mauboussin and Rappaport (2016) in the article entitled “Reclaiming the idea of
shareholder value” attempts a discussion on the issues that are faced by the organization in the
realm of the corporate governance. The authors of the article majorly focus on the fact that the
concerned organizations lack in the development of the governing objectives that need to be
present within the given organization in order to implement a proper corporate governance
within the organization. The authors state that the proper corporate governance tends to provide
the stakeholders of the organization with the proper basis for the assessment of the company as
well as the executives who have been serving the company. The authors opine that the governing
objective is one of the major building blocks of the company. The governing objective of the
company helps in the development of the choices, communication and the culture that is
implemented by the concerned business organization. The governing strategy of the company
also helps in the allocation of the capital that is required for the establishment of the company in
the initial days.
The authors further discuss the fact that the governing objective of a company is defined
according to two different viewpoints in the modern times. One of the viewpoints states that the
key aim of the concerned companies operating worldwide is the maximization of the value of the

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shareholders. The authors state that the majority of the companies that have been operating
within the markets operating under the common law, as for example, the markets of the United
Kingdom and the United States tend to follow this school of thought. The other school of thought
regarding the governing objective of the corporate organizations refer to the fact that the
balancing of the interests of the stakeholders is the key objective of the concerned business
organization. It is majorly observed that the companies that have been operating within the
territorial boundaries of the countries practicing the civil law like those of Japan, Germany and
France tend to follow this school of thought. The authors opine that contrary to the popular belief
the maximization of the shareholder value refers majorly to the proper allocation of the resources
that would in turn help in the development of the cash flow within the company for a longer
duration. The authors further stress on the fact that the organizational success is heavily
dependent on the proper relationship that it maintains with both the internal and the external
stakeholders of the organization.
The major strengths of the article in discussion by Mauboussin and Rappaport (2016) lie
in the discussion on the stakeholder value and the ways in which the stakeholder value might be
maximized. The major issues that are presented within the article refer to those that deal with the
maximization of the stakeholder values within the organization. The other major strength of the
article lies in the discussion of the governing objectives that are maintained by the concerned
organization. The authors of the article discuss the issues that are presented due to the improper
knowledge on the importance of the governing objective within the given organization. The
company as opined by Herciu and Şerban (2016) should aim at the maximization of the
stakeholder values within the organization. Chedli (2015) further opine the fact that it is not
possible for any business organization to attend to the issues that are presented by the various

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stakeholders of the company but however, the company should aim at the resolution of the major
issues that are being pointed out by the concerned stakeholders. The management of the
organization should be bestowed with the power to put forth a proper balance among the issues
that are highlighted by the stakeholders of the organization as well as decide on the ways that
might help in putting forth a resolution of those issues. The decision-making process of the
managerial staff of the organization must be known to the concerned administrators. This would
in turn help them in the evaluation of the processes that are undertaken by the concerned
management.
The major limitations of the study lie in the fact that the recommendations that are
suggested by the authors tend not to be feasible in the operations of the companies in general.
The article suggests the implementation of the incentives towards the internal stakeholders of the
company especially the employees of the organization. However, Albulescu (2015) argues that
the implementation of the proper incentive schemes within the given organization is not a
feasible solution in the majority of the cases. The companies in discussion are known to have
been dealing with the implementation of the proper incentive plans in order to help the
concerned employees to pursue the governing objectives of the concerned company which in
turn might help in the attainment of the proper competitive advantage within the given market.
In lieu of the above discussion it might safely be stated that the companies should aims at
the maximization of the value of the shareholders along with the balancing of the interests of the
stakeholders is the key objective of the concerned business organization. The management of the
organization should be bestowed with the power to put forth a proper balance among the issues
that are highlighted by the stakeholders of the organization as well as decide on the ways that
might help in putting forth a resolution of the highlighted issues.

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References and Bibliography
Albulescu, C. T. (2015). Banks’ profitability and financial soundness indicators: A macro-level
investigation in emerging countries. Procedia Economics and Finance, 23, 203-209.
Carson, C. M., Holloway, B. B., & Lozner, M. L. (2014). Growing Too Fast? an Entrepreneurial
Dream... or Nightmare. Journal of the International Academy for Case Studies, 20(1),
115.
Chedli, M. K. E. (2015). Entrepreneurial Features of the Creators of Innovative
Enterprises. International Journal of Economic Practices and Theories, 5(3), 213-221.
Daraban, M. C. (2016, September). An empirical view on value theory and value-based
management. In CBU International Conference Proceedings (Vol. 4, pp. 026-035).
Herciu, M., & Şerban, R. A. (2016). Creating Value–From Corporate Governance to Total
Shareholders Return. An Overview. Studies in Business and Economics, 11(2), 36-50.
Mauboussin, M. J., & Rappaport, A. (2016). Reclaiming the idea of shareholder value. Harvard
Business Review.
Sherman, H. D., & Young, S. D. (2016). Where financial reporting still falls short. Harvard
business review, 94(7), 17.
Zhong, N., Wang, S., & Yang, R. (2017). Does corporate governance enhance common interests
of shareholders and primary stakeholders?. Journal of business ethics, 141(2), 411-431.