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What business schools teach about shareholder value

Inside a Harvard Business School classroom. HBS1908/Wikimedia Commons

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Our series, “The Price of Profits,” is looking at how the idea of maximizing shareholder value has changed American business and the nation, starting with where the idea came from. One starting point is the nation’s business schools. But what those schools teach is changing.

Dan Bobkoff, an editor with our partner Business Insider, recently spent a year in a business journalism program at the Columbia Business School. He went back to report on what’s taught today.

“What exactly did we learn?” Bobkoff asked.

“That’s a very good question,” replied Rebecca Hong, a former Columbia classmate. 

“I’d say the overarching lesson that we learned is that while maximizing shareholder value is very important, we have to think about it on a larger scale in terms of the triple bottom line,” she said.

She took a lot of classes in social enterprise, which promotes focusing on people and the environment in addition to profits.

Shanna Cox took different classes and had a more traditional view of taking care of shareholders. 

“The professors were really good at giving a broader overview that might not be the only consideration you have to take,” she said. “There might be some other considerations.”

Sometimes, professors sneak those other considerations in. Corporate finance is the class where students learn how to calculate shareholder value. Bobkoff’s professor, Daniel Wolfenzon, gave a homework assignment requiring students to apply formulas to decide what direction a chocolate company should take. There are many possibilities.

“There are two projects that are great for the environment, but are not so great for the shareholders,” Wolfenzon said, “and I want the students to struggle with those cases and to realize that the tools that we’re using are not capturing the environmental benefits.” 

At New York University’s Stern School of Business, finance professor Roy Smith said he teaches that shareholder value is a core tenet of American economics and law. He said corporations should focus on growing the economy, “not to engage in controversial activities that try to benefit the world.” 

But even Smith said companies should adhere to the ethical norms of the era they’re in.

“You can only go so far in the pursuit of pure profits,” he said.

It was business schools — especially Harvard— in the late ’70s and ’80s that led the way in pushing shareholder value. But today, many students start Harvard Business School with Gautam Mukunda’s leadership class. He said he can’t wait until a student says that companies have a legal responsibility to maximize profits. 

“This is one of the most important things they need to unlearn,” he said. “Because many of them believe this. And many of them believe the specific wording that a fiduciary responsibility exists. And it’s simply not true.”

One more way things are changing? Wake Forest now has a moral philosopher, James Otteson, on its business faculty. 

“I’ve asked my colleagues to think about, well, ‘why finance?'” Otteson said. “So not just how to do it, but what is the good it can provide?” 

All this suggests that much of the next generation of business leaders is thinking beyond the bottom line.

“The Price of Profits,” our series with Business Insider, looks at what happens when profits become a company’s product. For more, visit

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