The Slow Recovery in NOT due to the Dodd-Frank Law.

It is due to a dangerous doctrine: Shareholder Value Maximization (SVM)

robert-ayresThe goal of shareholder value maximization (SVM) is now widely adopted by corporate boards and taught in business schools. to the exclusion of all other goals.[1] SVM is a new doctrine in economics. It is most often attributed to Milton Friedman, who said in New York Times Magazine back in 1970: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits” (Friedman 1970). He also said that corporations are not “persons”, even though corporations have the legal status as persons, and that shareholders necessarily (being rational utility maximizers, by assumption) want to maximize profits, whence any act of corporate social responsibility to be ‘taxation without representation’. This fits the ‘principal-agent” theory of economics, which assumes that corporate managers are simply agents of the owners (shareholders), whence SVM seems to follow automatically (Jensen and Meckling 1976).

The activists and SVM “believers” (it is a religion, not a rational policy) have taken over most of the corporate board rooms.

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