Shareholder value vs shareholder welfare

IN whose interest should companies be run? For a long time, the prevailing view held that firms should put their shareholders first by maximising profits and thus shareholder value.

But Luigi Zingales of the University of Chicago Booth School of Business believes firms and asset managers should expand their profit maximisation objective and pursue policies that reflect what their investors want. And that isn't always simply about the bottom line.

"I think 'What should companies maximise?' is the most important question we face in modern capitalist economies today," Prof Zingales explained at the 2019 CFA Institute Seminar for Global Investors, "because the way companies are run is at the very core of our capitalist system".