Earlier this month, the Financial Times published a pair of important articles asking why the goal of a firm is to maximize short-term shareholder value is still being taught in business schools. “While there is growing consensus that focusing on short-term shareholder value is not only bad for society but also leads to poor business results, much MBA teaching remains shaped by the shareholder primacy model.” The challenge is massive because shareholder value is now deeply embedded in the basic economics that is taught in business schools and economics faculties around the world. Moving on from the shareholder value theory, which even its foremost exemplar, Jack Welch, has called “the dumbest idea in the world”, will entail re-thinking and re-writing much of the basics of modern economics. Two prime textbooks on managerial economics To understand the depth of the problem, let’s look at a couple of the best-selling textbooks on managerial economics. One is Managerial Economics and Business Strategy, by Professor Michael Baye, the Bert Elwert Professor of Business Economics in the Kelley School of Business at Indiana University and Jeffrey T. Prince, Associate Professor of Business Economics & Public Policy also at the Kelley School of Business. …read more
Source: FULL ARTICLE at Forbes Latest