Yuri Biondi


During recent decades, the rapid pace of financial markets involving new modes of management, governance, and regulation has framed business firms. This corporate drift toward financialization is summarized under the “shareholder value” label. What do financial markets do? Unequivocally, they organize trading on shares that are securities: tradable financial entitlements established by law, which formalize expectations, and claims of financial rents paid by the issuing company. Actually, how continued quotation on share exchanges came to be the barometer of economic or social welfare is a different matter. The latter adoption has required quite a great leap from “the euthanasia of the rentier, of the functionless investor” involving changes in, and reforms of, monetary and financial architectures at policy-making and regulatory levels; banking and financial institutions; shareholding, monetary, and investment funds (including pension and insurance); and the management, organization, and accounting of business firms. This general trend has been further shaped by transnational imitation between various socioeconomic environments and regulatory regimes, led by some global institutions. This paper aims to address some theoretical problems with shareholder value that come from its misguided understanding of shareholding and the business firm. Shareholder value relies on complementary views that point to market and ownership to understand the dynamics of both securities markets and the enterprise activity. But what happens when shares, acquired at a definite price in a given circumstance, relate to the enterprise congeries of legal and economic systems involving flows and immobilizations that require an accounting system to explicate them? This Article engages this theoretical challenge by drawing upon the concept of the firm as an “enterprise entity,” which has significant implicationsfor governance and disclosure. It argues that the enterprise entity is a comprehensive approach to the firm that integrates accounting, economics, and law, thus improving on the received understanding of the firm. PartII discusses a framework based on the concept of the firm as an enterprise entity. Part III then contrasts this framework with three alternative views on the firm that jointly constitute the shareholder value rhetoric: the “black box,” the “proprietor-entrepreneur,” and the “legal person.” Further, these views are criticized as “daydreams.” Finally, Part IV applies this comparative assessment to matters of corporate governance and disclosure, clarifying the novel approach to governance and disclosure of the business firm.