What do firms maximise? The contribution of business history to a controversial topic

• Published in: Business history Vol. 56; no. 1; pp. 22 - 36
• Main Author: Muller, Margrit
• Format: Journal Article
• Language: English
• Published: Liverpool Routledge 2014; Frank Cass & Company Ltd; Taylor & Francis Ltd
• Subjects: Analysis; Business history; Business management; Capitalism; Case studies; Companies; Corporate governance; corporate governance of Swiss firms; Decision makers; Decision theory; Discourse; distribution of gains and losses in growth periods and depressions; Imperfect competition; Investor relations; Management; Management science; Management techniques; managerial behaviour; Market economy; Market forces; Organizational behavior; Organizational behaviour; Perfect competition; Profit maximization; Profits; shareholder value; Shareholders wealth; Social environment; Social norms; Stockholders; Studies; Top management; Switzerland
• ISSN: 0007-6791; 1743-7938
• DOI: 10.1080/00076791.2013.818423

With 'shareholder value', the old and controversial theoretical debate about what firms in a market economy maximise has become the subject of public debate. If we could assume perfect competition, such a debate would make no sense at all: if firms failed to maximise profits they would simply disappear. But in effect, firms have some room for manoeuvre, decision-makers are embedded in a social context and their decisions are influenced by social norms. In such a world, the question of what the firm does or should maximise is important. The main objective of this paper is to show that the case study approach to business history can contribute considerably to this important topic if grounded on an appropriate theoretical framework. The case studies highlight ways in which in modern capitalism the firm maximises 'management's value' and that we must look beyond market forces to understand what the top management maximises.