From "Quest for Value" to Quest for Values

The global funds are business firms led by managers whose goal is to maximize stock value, following the mandates of their shareholders and investors. They are pension funds, mutual funds, institutional investors who are administering the savings of their clients, workers, and families, you, and me. There are countless ethically responsible funds; however, they carry only 0.5 percent of the total investments.

There seems to be a massive lack of awareness that investors and shareholders have the final responsibility for the many wrongdoings described above.

SVM generates a new level of awareness by linking business strategies with people's decisions to maximize stock value. A new level of awareness must emerge, a new level of social responsibility, a new universal ethics, involving all stakeholders from all over the world.

SVM is born of the incorporation of economic thinking into strategic management. Economics as a discipline originated as a branch of moral philosophy; therefore, it is a powerful way to introduce ethical dimensions into business disciplines.

Probably the architects of modern business ethics did not realize the consequences of their thinking. In their intuitions, a little speculation, or a little level of market power was not a serious concern. But today speculation is 10 times larger than the real economy.

Adam Smith had wisdom that can help us today. He solved a dilemma between two extremes. Hobbes believed that people were wicked and vicious therefore should be controlled, whereas Locke believed that people were naturally good, so they should be free. Adam Smith stood in the middle. People can have values and virtues, but not everyone has them, so institutions need to intervene to preserve personal liberties. It is a continuous learning process in which we need to find ways to improve our system.

The pressure to maximize stock value is so strong that regulations cannot cover all possible implications, especially in a global economy, because firms can export their wrongdoings to other nonregulated regions.

According to Milton Friedman, if firms do not maximize stock value, they can suffer serious consequences. Upset investors may abandon such firms leading to a fall in stock values that can then lead to a lack of equity financing. Other competitors can use their power to eliminate good-willed firms. Therefore managers with good intentions may have a hard time trying to enact their personal ethics.

Is there any solution to this dilemma? It is by incorporating "values" into the economic system. A firm with strong values can be rewarded by the community, employees, clients, partners, and the government. This may take place through larger sales, stronger relationships, and better exchange of knowledge as a result of mutual trust. In that case there is no contradiction between maximization of stock value and ethical values.

The community must enact its values. Investors need to invest in ethical firms or ethical investment funds, even though their yields may not be as high as they would be otherwise. Consumers would need to buy from ethical firms, even though they may not have the best prices.

This requires more transparency, similar to the credit rating agencies, but oriented to rate firms and investment funds based on their values. The only way the entire economic system would act with values is by a universal ethics, where all members become aware of their responsibilities and enact them.

For people who believe in the Bible (Judaism, Christianity, and Islam), the God of Genesis gives "power" to Adam ("Have dominion over the fish"), "resources" ("I give you every plant . . . to be your food"), and "innovation" ("God took the man and settled in the Garden of Eden to cultivate and care for it"). This provides a spiritual support to the three dimensions of stock value creation. For Eastern religions, Hinduism, Buddhism, Daoism, and Confucianism, the maximization of stock value must be put in harmony with the values of the other stakeholders. Today, the Dalai Lama is a strong defender of the need to have universal ethics based on personal values. Similarly Greek philosophy (such as Aristotle) searches for a harmony based on virtues such as prudence (wisdom), moderation, and justice. This incorporates the value of all stakeholders' happiness. The ethics of rights (Kant) conforms to Greek philosophy. Ethical values must be universal in order to be ethical, so maximization of shareholder wealth must also maximize the wealth of the other stakeholders to be acceptable. Win-lose situations are not acceptable.


In summary, it is not true that ethics and business are divorced realities. SVM's approach creates awareness of this and provides philosophical and practical solutions, by incorporating values into stock value maximization.

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