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The Quest for Shareholder Value: Stock Repurchases in the US Economy

Published online by Cambridge University Press:  17 August 2016

William Lazonick
William Lazonick*
Affiliation:
University of Massachusetts Lowell
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Summary

During the 1980s and 1990s the argument that “maximizing shareholder value” results in superior economic performance came to dominate the corporate governance debates. In this paper, I outline the rationale for the shareholder-value perspective, and show that, rooted in agency theory, it lacks a theory of innovative enterprise. Hence it cannot be used to analyze the conditions under which the stock market supports or undermines the process of value-creation. To go beyond agency theory and its shareholdervalue perspective, I present a framework for analyzing the functions of the stock market in the business corporation and the influence of these functions on the social conditions of innovative enterprise. I then use this framework to explain why in the United States since the 1990s there has been a widespread trend in corporate stock repurchases, including a sharp acceleration in buybacks since 2003. Focusing on a list of the largest corporate repurchasers in the United States, I raise questions concerning the relation between stock buybacks and value-creating investments in the US economy as a whole. I conclude with a discussion of why companies do stock repurchases, and in particular whether they can be justified as a contribution to innovative enterprise. I argue that the ultimate justification for stock repurchases is the ideology of “maximizing shareholder value” - an ideology that works to the direct benefit of corporate executives who make corporate resource allocation decisions and who derive high levels of remuneration from munificent stock option awards.

Résumé

Résumé

Pendant les années 1980 et 1990, l'argument selon lequel la « maximisation de la valeur pour l'actionnaire » permettrait d'accéder à des performances économiques supérieurs parvint à domineer les débats sur les forms de gouverance de firmes. Dans cette contribution, l'auteur analyse le raisonnement qui fonde cette perspective de la « valeur pour l'actionnaire » et montre que son ancrage dans la théorie de l'agence ne lui permets pas d'appréhender les questions afférentes à « l'entreprise innovante ». Dès lors, elle n'est pas en mesure de fournir un cadre adequate pour appréhender les conditions sous lesquelles les marches boursiers peuvent soutenir le (ou nuire au) processus de création de valeur. Pour parer à ces carences, l'auteur propose un cadre conceptuel qui a vocation à éclairer les fonctions des marchés d'actions dans les logiques d'entreprise et l'influence qu'elles peuvent avoir sur les conditions sociales de développement de l'entreprise innovante. Le cadre est ensuite mobilize pour expliquer pourquoi, dans le cas américain tel qu'il s'est présente depuis les années quatre vingt dix, on constate une tendance très forte aux rachats de titres par les enterprises qui a connu une nette acceleration après 2003. En se focalisant sur un échantillon des plus importants opérateurs en matière de relution aux États-Unis, l'article montre ainsi comment, au niveau de l'économie américaine, sont rendus les arbitrages entre rachats de titres et investissements porteurs de création de valeur. La conclusion examine la question des motivations au rachat et propose, plus précisément, d'évaluer si ils peuvent être justifiés du point de vue de leur contribution au development des enterprises innovantes. La thèse défendue est alors que la justification ultime des rachats de titres se résume à l'idéologie de la « maximization de la valeur pour l'actionnaire » qui est de fait au service des dirigeants d'entreprises qui y puisent à la fois la justification de leur pouvoir en matière de décisions d'allocation et des revenus substantiels tirés de l'usage avantageux des programmes de stock-options.

Keywords

Bourseentreprise innovantela valeur pour l'actionnaireles rachats de titresL20stock marketinnovative enterpriseshareholder valuestock repurchasesL20
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 74 , Issue 4 , 2008 , pp. 479 - 540
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2008 

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