The end of shareholder primacy

The end of shareholder primacy

An article written by Dr. Adonis Pegasiou, EIMF Academic Director

In recent years, private corporations have placed greater emphasis on issues of social responsibility, rethinking a long-established position of profit-maximisation solely to the benefit of their shareholders. Even more, the ‘shareholder-first’ mantra put forward fervently by Nobel Prize-winning economist and free market advocate Milton Friedman, stating that the only social responsibility of a business is to increase its profits, has now been openly rejected by the US top corporate leaders in the latest meeting of the Business Roundtable that took place in August this year.

The Business Roundtable (BRT) is a non-profit association based in Washington, D.C. whose members are chief executive officers of major U.S. companies (including Apple, Amazon and JP Morgan among others). Since 1978, BRT has occasionally issued Principles of Corporate Governance and since 1997 it  was consistent in endorsing principles of shareholder primacy (i.e. corporations exist principally to serve shareholders).

Its latest statement on 19 August 2019 supersedes previous statements and outlines a modern standard for corporate responsibility (Source: Business Roundtable: Link). Specifically, the US top executive leaders have pledged to adopt the following guiding principles:

  • Delivering value to their customers by meeting or exceeding customer expectations.
  • Investing in their employees by compensating them fairly and providing important benefits. This also includes supporting them through training and education that will help them develop new skills for a rapidly changing world. The participants also confirmed the fostering of diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with their suppliers by serving as good partners to the other companies, large and small, that help them meet their missions.
  • Supporting the communities in which they operate by respecting the people in these communities and protecting the environment by embracing sustainable practices across our businesses.
  • Generating long-term value to their shareholders, who provide the capital that allows companies to invest, grow and innovate. They are committed to transparency and effective engagement with shareholders.


Through these key principles, the US-based business world has publicly vowed to make a shift from a ‘shareholder-first’ standpoint to a more broad stakeholder approach, highlighting the importance that is now being placed on ‘Corporate Social Responsibility’, described by the European Commission as the ‘guiding policy whereby companies integrate social and environmental concerns in their own mission, strategies and operations and in their interactions with their stakeholders on a voluntary basis’ (Source: EU Commission 2011 – Link).

Such a development cannot be seen in isolation from wider political debates over the state of modern capitalism. Unregulated free-market capitalism and laissez-faire economic liberalism that solely highlight profits as the key objective for corporations, have been losing ground since the financial crisis of 2008. The latest statement of BRT merely confirms this trend and shows that even corporate leaders acknowledge the limitations of ‘shareholder primacy’ and are opting instead for a more inclusive approach that seeks to secure a sustainable development where all stakeholders’ interests and concerns are taken into consideration. This alternative approach, named by some ‘conscious capitalism’, does not reject the idea of profit but notes that it must be pursued in a manner that integrates the interests of all major stakeholders, as opposed to just shareholders.

What Board Directors worldwide should take away from this remarkable development is that they need to place Corporate Social Responsibility high on their agenda, despite not being a legal requirement, if they are to govern robust organisations that don’t simply aim for short-term profits but instead deliver long-term value and continue to operate in a sustainable and secure environment.

About the author

Dr. Adonis Pegasiou is the Academic Director of the European Institute of Management and Finance (EIMF). He holds a PhD in Politics (University of Manchester), an MSc in European Policy Studies (University of Bristol) and a BSc in Economics (London School of Economics (LSE)). Furthermore, he is a Professional Member of the International Compliance Association (MICA). Following his doctoral studies, he held positions in the public and private sectors including Cyprus Airways (Head of Chairman’s Office and Non-Executive Board Member – appointed by the Government and approved the by Parliament), the Secretariat of Cyprus Presidency of the Council of EU, the Embassy of Kuwait in Cyprus (Consultant to the Ambassador) and the Cyprus Cooperative Bank (Non-Executive Board Member – appointed by the Government approved by the Parliament and European Central Bank).

Professional Education for Directors and Senior Leaders

EIMF offers a variety of training activities for BoD Members, Senior Directors and C-Level Executives that want to be educated and become certified in specialised technical and non-technical areas. Amongst EIMF’s specialised portfolio of training courses, professionals will identify the below professional workshops, which are scheduled to take place in H2 of 2019:

  • Certificate in Governance, Financial Regulations and Compliance
  • Corporate Governance for Credit Institutions and Investment Firms
  • Directors’ Development Programme
  • Directors’ Duties and Responsibilities
  • International Economics Sanctions Overview
  • Leading Leaders Workshop
  • Risk Governance Workshop


For additional details on EIMF’s professional education, please view the calendar of scheduled educational programmes found here, or speak with an expert learning and development adviser at EIMF at +357-22274470 or [email protected].