By Dominique Jacquet

The film about Paramount shows the devastating effects of a financial policy that returns to shareholders funds that should have been allocated to investment and the creation of value for customers.

The vidcast dedicated to Unilever shows a firm in full doubt as to the economic and financial relevance of its commitment to sustainable development, which sells its “ESG assets” because it has some difficulties in managing them, and which strongly renews its executive committee to refocus the concerns of managers towards financial performance.

Finally, last month, the case of Reddit showed us that the creation of shareholder value necessarily involves taking into account the firm’s societal environment.

So, the question that arises is: “should we maximize the creation of shareholder value, positive ESG externalities or the quality of the customer experience? “.

Organization theorists elegantly answer this question by evoking the sequential attention paid to objectives… Concretely, when we go too far in one direction, it is recommended to backtrack and bring up to date other objectives which had been somewhat neglected.

Corporate finance theorists consider, for some of them, that absolute priority must be given to maximizing value for shareholders. Others care about stakeholders and put them on the same level as shareholders.

The debate is lively, quite ideological and the arguments of each party have a certain weight. It is clear that companies must convince shareholders to provide funds, which translates into a return promise that must be kept. In contrast, we mentioned the case of Rio Tinto (films – January and February 2023) whose operational decisions paid little attention to stakeholders with negative consequences on shareholder value.

Therefore, the complexity of the subject requires introducing a certain dose of nuance into the debate. Unfortunately, nuance and moderation in words and the expression of convictions do not seem to be up to date. Let us recall the sentence cited in the blog (June 2023) dedicated to the accounting of stock options and RSUs as expenses in the P&L: “For the last time: Stock options are an expense” (HBR, 2003). Anger and arrogance have never been cultural or scientific arguments.

While waiting for a serious renewal of the concepts of utility function, cost of capital and externalities, let us content ourselves with a less warlike, but more effective pragmatism, maintaining a certain balance between the different constraints.