Question A:
Having companies run to maximize shareholder value creates significant negative externalities for workers and communities.
Responses
Responses weighted by each expert's confidence
Question B:
Appropriately managed corporations could create significantly greater value than they currently do for a range of stakeholders – including workers, suppliers, customers and community members – with negligible impacts on shareholder value.
Responses
Responses weighted by each expert's confidence
Question C:
Effective mechanisms for boards of directors to ensure that CEOs act in ways that balance the interests of all stakeholders would be straightforward to introduce.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 John Campbell |
Harvard | Bio/Vote History | ||
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Question misuses "externality." Voluntary market transactions are not externalities. Having? Absence of government coercion is not "having."
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 Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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It is impossible to make an encompassing statement valid for all industries
-see background information here -see background information here |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Alternative forms of governance do not address externalities directly. Corporate reputation and shareholder governance is sufficient.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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This is the point of regulation. For examples, pollution and labor regulations are intended to mitigate such effects.
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 Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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Could have more confidence if comparing to a real alternative or counterfactual.
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 Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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There are always pecuniary externalities. From firms to workers they're typically *positive*: more capital is better for workers.
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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One can not maximize shareholder value without considering other stakeholders. There might be externalities but probably not significant
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 Lars Hansen |
UChicago | Bio/Vote History | ||
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Negative externalities inflicted by corporate activity are best handled with well designed legal structures and Piguovian taxation.
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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Did you mean "statistically" significant? Using the word 'significant', influences the response.
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 David Hirshleifer |
USC | Bio/Vote History | ||
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Thriving and competitive businesses probably tends to generate positive externalities for the community.
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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Workers are affected by externalities from firm production such as carbon emissions, which lead to global warming and extreme weather.
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Shareholder value, unlike stock price, is a long-term concept that incorporates all constituencies that are important to business success.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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sometimes, but doubtful that this is pervasive
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 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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If the regulatory environment penalizes eggregious negative firm externalities, firms can maximize shareholder value without hurting others.
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 Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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This is the motivation for regulation, including regulation related to labor, the environment, and antitrust
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Redistributive shocks matter. They have persistently redistributed rewards to shareholders and away from workers in the last 30-40 years
-see background information here |
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Depends on context. Ex. with poor environmental regulation, a profit maximizing company will pollute. With effective regulation, it won’t.
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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It's not clear theoretically that "significant negative externalities" would be created and I'm not aware of strong empirical work showing.
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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There is no reason why shareholder max. should lead firms to internalize these externalities (unless, e.g., incentivized by regulation).
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Profit maximization leads to productivity and economic growth but also, absent enforcement, to less competition and more carbon emissions.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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It depends on the industry. Some generate negative externalities (social and environmental), while others generate large consumer benefits.
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Unless government taxes/subsidies perfectly cancel all externalities, including market power, maximizing SV is not socially optimal.
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Weakly agree. Maximizing shareholder value can create negative externalities for other stakeholders, but the effects are heterogeneous.
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Certain companies generate very negative externalities, but the statement is not valid in general
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Depends
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Depends on the regulatory environment in which companies maximize shareholder value.
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 René Stulz |
OSU Fisher School | Bio/Vote History | ||
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Shareholder wealth maximization can make both workers and communities better off. Neither workers nor communities benefit from failing firms
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 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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There are examples in which shareholder maximization has led to negative externalities, but hard to argue this is a rule.
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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There are clearly instances where their are externalities associated with corporate actions, but this is not the general rule
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Climate externalities are good example of something shareholder value maximization typically ignores. Short-termism of shareholders another.
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 Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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Negative externalities to stakeholders are likely meaningful, but correcting them through "appropriate management" is easier said than done.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Horrible question. "Appropriately managed" can increase value for all. But by who? Question implies government. Sentences with subjects pls!
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Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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There are several instances where shareholders' value can focus on short term goals only, while a longer term approach can improve value
-see background information here |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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If there is a large difference in actions, given reputation, there would be a large effect on shareholder value.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Hard to know. But if true, this would imply almost no mis-alignment of incentives between shareholders and the others. That seems unlikely.
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Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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Appropriately managed seems unclear/aspirational if the goal is the create additional value. It would be interesting to know what changes.
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Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Very doubtful, except for a few cases like (i) local monopsony power (ii) pollution and such externalities.
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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some value could possibly be created for other stakeholders -- but not significantly more
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Lars Hansen |
UChicago | Bio/Vote History | ||
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Some corporations are poorly managed. But I fail to see an alternative that dominates without confronting tradeoffs among stakeholders.
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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David Hirshleifer |
USC | Bio/Vote History | ||
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A target of serving a range of stakeholders gives managers license to pursue their own preferences and self-interest.
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Externalities such as global warming are costly to address, and require carbon taxes or sustainable finance mandates which cost shareholders
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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If office temperature could dial up five degrees in summer, everybody--workers, shareholders, and Planet--is better off. Just an example.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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There is no reason to think that firms are as inefficient as an affirmative answer would imply.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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There are trade-offs when trying to please several types of stakeholders.
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Boards could probably maximize value for a wider range of stakeholders, but not enough evidence to know how this would affected shareholders
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Companies benefit from a pro-stakeholder reputation. If such actions have negligible cost to shareholders, they want to implement them.
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Hard to imagine creating significant additional value for stakeholders without significant drop in share value.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Seems unlikely to be possible without some cost for shareholders
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Corporate management is responding well to the legal environment that makes it profitable to act non-competitively, to pollute, etc.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Changing inefficient companies can increase value to various stakeholders. Changing efficient companies just moves value among groups.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Maximizing SV is unlikely to be first best, but interventions, except pro-competition ones, are likely to create significant costs as well.
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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What exactly does "appropriately managed" mean and who decides?
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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general statement, it does not apply to firms creating large externalities (e.g polluters), which are not the majority of firms
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Unlikely, unless one believes host of firms are poorly governed.
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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It is not clear that it would be negligible costs. Also I would somewhat agree with the statement but that wasn't an option.
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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René Stulz |
OSU Fisher School | Bio/Vote History | ||
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Again, hard to state this as a rule. There are certainly firms for which the statement could be true.
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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There are always tradeoffs
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Good management focused on the long-run health and well-being of the company, its employees, and its community attracts the best resources.
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Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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It is extremely difficult to incentivize CEOs to consider all stakeholders without empowering them to pursue their own selfish interests.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Passive agian. By who? By boards or by regulators? Interests are traded, not balanced. A gains, B loses. Owners pillaged, golden goose dies
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Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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There are measures that would not solve all the problems but would definitely bring to an improvement
-see background information here |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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I do not see an easy way to provide alternative goals. It will become political.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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This doesn't seem "straightforward." It would be complicated to balance the potential conflicts of interests among all stakeholders.
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Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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Related to the previous question - how would board effectiveness change in practice?
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Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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Shareholder value maximization is the least ambiguous and most well defined of the many alternative objectives I have seen.
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Some innovations would be good (e.g. local externalities), but the scope is government policy, not board structure
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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1) often hard to measure stakeholder welfare; 2) an 'end around' can occur relative to an explicit measure/variable to negate the intent
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Lars Hansen |
UChicago | Bio/Vote History | ||
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The term ``balance’’ is not operational without resolving tradeoffs among stake holders in arbitrary and potentially harmful ways.
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Unclear if boards are meant to replace regulation, taxes or other forms of external market signals.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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it is a hornet's nest
-see background information here |
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Corporate governance is hard to do even when the objective is simple (maximize share price). Not to mention when the objective is complex.
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Not aware of many good examples of this
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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This is a complex problem theoretically, with in practice many political and practical implementation limitations. Not straightforward.
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Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Mechanisms for boards of directors can struggle to balance shareholder interests, whose goals are much more aligned than stakeholders’
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Very hard to answer this question without having more evidence on the first two questions and how value is created for other stakeholders.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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There is no simple way to entirely change corporate governance. It would be a mess like Brexit.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Incentives are agreed on before complex situations arise. Balancing all possible interests and future events is almost impossible.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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They may be feasible, they are certainly not easy to implement.
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Challenging to ensure managers are aligned with shareholders. Adding additional interests will likely complicate matters even if worthwhile.
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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When the conflict between shareholder maximization and societal goals emerge, the board should not choose, better to let society regulate
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Boards have many mechanisms to provide incentives for CEOs but there exists a lot of uncertainty regarding their efficacy.
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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René Stulz |
OSU Fisher School | Bio/Vote History | ||
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I am not convinced that the mechanisms proposed so far would work.
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Boards are imperfect governance devices, often co-opted and controlled by senior management.
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Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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