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The Value and Virtues of Free Enterprise

Socialism is on the rise, and capitalism is on its back foot. The implications span all parts of our society but certainly include corporate governance. As is often the case, the corporate governance issue boils down to who makes decisions, and to what end those decisions are—and should be—aimed.  

Should corporations strive solely to maximize shareholder value? If one assumes the answer is “yes”—whether for reasons of law, economics, or philosophy—is it even possible to maximize shareholder value based solely on expected value and return-on-investment calculations? Or must other considerations inform the relevant decision-making?  

And if one concludes that other factors are necessarily relevant, does that mean only a hypocrite could oppose “stakeholder capitalism,” or the use of “environmental, social, and governance” factors, or the pursuit of “diversity, equity, and inclusion” agendas?  

To attempt to thread this needle, such that one might advocate for a combination of free market capitalism, shareholder wealth maximization, and principles like The Heritage Foundation’s “Four Cornerstones” as an effective basis for corporate governance, while at the same time rejecting ESG, DEI, and “stakeholder” capitalism, is sure to generate much debate.  

However, for purposes of this op-ed, I am going to posit precisely that under the banner of “free enterprise.” Obviously, space limitations will necessitate merely flagging some relevant issues. But these debates are critical right now, and just marking the outlines of parts of the relevant landscape matters. 

Focusing on free market capitalism generally (and shareholder wealth maximization specifically), a complaint one often hears is that it supposedly prioritizes shareholder wealth maximization at the expense of the environment, workers, consumers, and other stakeholders. However, several points should be considered before accepting that characterization. 

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