The decade-long boom in the US stock market and the more recent boom in the
US economy have fostered widespread belief in the economic benefits of the
maximization of shareholder value as a principle of corporate governance.
In this paper, we provide an historical analysis of the rise of shareholder
value as a principle of corporate governance in the United States, tracing
the transformation of US corporate strategy from an orientation towards re
tention of corporate earnings and reinvestment in corporate growth through
the 1970s to one of downsizing of corporate labour forces and distribution
of corporate earnings to shareholders over the past two decades. We then co
nsider the recent performance of the US economy, and raise questions about
the relation between the maximization of shareholder value and the sustaina
bility of economic prosperity.