The Business Roundtable is an association of America’s chief executive officers who what to promote a thriving economy. Up to 1981, they said:

“Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy.”

The statement embraces a collaborative value tone.

A shift to maximizing shareholder value.

This shifted when, in 1997, the statement said if “the CEO and the directors are not focused on shareholder value, it may be less likely the corporation will realize that value.” The updated statement takes a singular tone.

Shareholder value took root from several sources. The most famous is an economist, Milton Friedman, who argued in 1970 that the only “social responsibility of business is to increase its profits.” Many argue that the stringent focus on maximizing shareholder value has left employees, ethics, and society less important. The earlier ideas of businesses delivering to serve balanced interests was lost.

Profit is good.

Generating a profit is a good and necessary element of any business. Profitability supports the business operations and strategic plans. Without profitability, product and service investments could not be made nor could investments in hiring and advancing employees, whether in salary, job satisfaction, or leadership development. While profitability can serve and support multiple interests, maximizing shareholder value only serves one interest – the shareholders.

Maximizing shareholder welfare a step in the right direction.

Two professors propose a modification to Friedman’s idea. Instead of maximizing shareholder value, it should shift to maximizing shareholder welfare. They state that shareholders have interests beyond just a financial return. Making investments in the environment or other social value elements are on the minds of investors and, given the choice, they may elect to forgo some early profits to make the right welfare-optimizing investments. An essence of the argument is that shareholders are real people who pursue the balanced interests approach more than the singular focus of returns with the least costs.

The idea behind maximizing shareholder welfare is a worthy shift. To make the idea better, the focus should be on maximizing collaborative value.

Maximizing collaborative value brings more to the formula.

Businesses do many things such as:

  • Building products
  • Developing services
  • Hiring and retaining talented individuals
  • Selling, supporting, and listening to customers
  • Partnering with other companies
  • Delivering returns for shareholders and investors
  • Serving in the community

To get the most out of each relationship takes collaboration. Collaboration is necessary within each dimension as well as between dimensions. For example, in developing a good product, it takes collaboration between development, marketing, and customer support. These are the minimal collaboration points. However, by not including customers – current and future – and potential partners, the product may miss the mark. Robust collaboration delivers greater value as long as it is productive, decision-focused, and a good balance between being innovative and iterative.

In this simple scenario, you can feel the collaborative value gain tangible momentum and create better odds for success and engagement across each dimension. To gain the collaborative value, it may take added time and dollars, but it increases the possibility of greater returns, greater engagement, and less risk. This is the power of maximizing collaborative value.

What investments can a company make for collaborative value?

Jamie Dimon, CEO of JP Morgan, and Warren Buffet, CEO of Berkshire Hathaway, recently stated that businesses need to stop issuing quarterly guidance. By ending this practice, they believe companies will focus on the longer term more consciously, making better strategic decisions. Although ending this practice may have a slight impact, more needs to be done.

Business leaders need to operate the business in the short-term while building a better business for the long term. Without this mindset and actions, risks will rise, and engagement will continue to decrease. Strategic investments and plans need to be made.

The type of strategic investments and plans will depend on the company’s focus, but it needs to contain a mix of product, technology, process, and people development. Lopsided investments can derail initiatives. Maximizing collaborative value requires leaders to determine the right mix of talent, product, and process development to gain the best long-term value for the business and all stakeholders engaged. Profitability needs to be in the mix. Without it, all fail in the long term.

To gain collaborative value, remember community.

Businesses play a key role within society – providing jobs, creating better ways to live and breathe, and participating in projects that lift up people where their businesses reside. When society is added into the collaborative value mix, we all improve and have brighter outlooks, creating an economy of well-being.

Maximizing collaborative value needs to replace maximizing shareholder value.

We cannot afford only short-term thinking and single focus actions. Without the right investments, what looks good in the short-term will not look good in the longer term. We need to bring in the necessary gears, match them up, and begin turning more of them to realize a greater collaborative value. When this occurs, we empower more profit, fulfillment, and betterment.



Hart, O., & Zingales, L. (2017). Companies Should Maximize Shareholder Welfare Not Market Value. Journal of Law, Finance, and Accounting,2, 247-274. doi:10.2139/ssrn.3004794

Schechter, A. (2017, December 7). It’s time to rethink Milton Friedman’s ‘shareholder value’ argument. Retrieved June 18, 2018, from

Yang, J. L. (2013, August 26). Maximizing shareholder value: The goal that changed corporate America. Retrieved June 18, 2018, from

Photo by rawpixel on Unsplash
Maximizing collaborative value needs to replace maximizing shareholder value. A singular focus on shareholders displaces the greater purpose of a business.