Shareholder value maximization has many issues but the most important one is that it “drains” a large part of the profits from companies both because shareholders control the board of Directors and thereby dictate how the profits are redistributed (to their advantage), and also in a desperate attempt to retain shareholder. Given the ever increasing free flow of capitals, investors can shift their capital allocations continuously to seek the highest return on investment at the lowest risk. This “free market” environment encourages a “race to the bottom” and a skewed allocation of profits between dividend payouts, investments inside the company, and investment in human capital (working conditions, wages…) In an economic system which relies heavily on consumption as the main driver of growth, squeezing human capital investments is tantamount to suicide (and no, credit is no substitute for a decent pay).
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