Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-22T20:06:25.330Z Has data issue: false hasContentIssue false
  • English
  • Français

CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE

Published online by Cambridge University Press:  28 November 2012

Waheed Hussain
Waheed Hussain*
Affiliation:
University of Pennsylvania, [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life.

Type
Articles
Information
Economics & Philosophy , Volume 28 , Issue 3 , November 2012 , pp. 311 - 331
Copyright
Copyright © Cambridge University Press 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Anderson, E. 1993. The ethical limitations of the market. In Value in Ethics and Economics, 141–167. Cambridge, MA: Harvard University Press.Google Scholar
Bainbridge, S. 2008. The New Corporate Governance in Theory and Practice. Oxford: Oxford University Press.Google Scholar
Chandler, A. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Harvard University Press.Google Scholar
Coleman, J.L. 1984. Economics and the law: a critical review of the foundations of the economic approach to law. Ethics 94: 649–679.CrossRefGoogle Scholar
Dworkin, R. 1985. Is wealth a value? In A Matter of Principle, 237–266. Cambridge, MA: Harvard University Press.Google Scholar
Easterbrook, F. and Fischel, D. 1991. The Economic Structure of Corporate Law. Cambridge, MA: Harvard University Press.Google Scholar
Fleischacker, S. 2004. On Adam Smith's Wealth of Nations. Princeton, NJ: Princeton University Press.Google Scholar
Friedman, M. 2004 [1970]. The social responsibility of business is to increase its profits. In Ethical Theory and Business, 7th edition, ed. Beauchamp, T. and Bowie, N., 50–55. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Goldman, A. 1980. Business ethics: profits, utilities and moral rights. Philosophy and Public Affairs 9: 260–286.Google Scholar
Hansmann, H. 1996. The Ownership of Enterprise. Cambridge, MA: Harvard University Press.Google Scholar
Hansmann, H. and Kraakman, R. 2001. The end of history for corporate law. Georgetown Law Journal 89: 439–468.Google Scholar
Jensen, M.C. 2001. Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance 14: 8–21.Google Scholar
Jensen, M.C. 2002. Value maximization, stakeholder theory, and the corporate objective function. Business Ethics Quarterly 12: 235–256.Google Scholar
Micklethwait, J. and Wooldridge, A. 2003. The Company. New York: Modern Library.Google Scholar
Mill, J.S. 1906 [1859]. On Liberty. New York, NY: Everyman's Library.Google Scholar
Nozick, R. 1974. Anarchy, State, and Utopia. New York, NY: Basic Books.Google Scholar
Rawls, J. 1999. A Theory of Justice, revised edition. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Roy, W.G. 1997. Socializing Capital: The Rise of the Large Industrial Corporation in America. Princeton, NJ: Princeton University Press.Google Scholar
Scheffler, S. 1982. The Rejection of Consequentialism. Oxford: Oxford University Press.Google Scholar
Sen, A. 1999. Development as Freedom. New York, NY: Alfred A. Knopf.Google Scholar
Singer, P. 1972. Famine, affluence, and morality. Philosophy and Public Affairs 1: 229–243.Google Scholar
Smart, J.J.C. and Williams, B. 1973. Utilitarianism: For and Against. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Smith, A. 2000 [1776]. The Wealth of Nations. New York, NY: Modern Library.Google Scholar
Stout, L. 2002. Bad and not-so-bad arguments for shareholder primacy. Southern California Law Review 75: 1189–1210.Google Scholar