SEC Commissioner Peirce Promotes Corporate Focus on Maximizing Value

SEC Commissioner Hester M. Peirce highlighted the need to refocus corporate priorities on shareholders rather than stakeholders, and the danger that the continuing shift in such focus reduces management accountability.

In her speech before the 18th Annual Corporate Governance Conference, Ms. Peirce referred to Shibusawa Eiichi, known as "the father of Japanese capitalism," and described the continuing relevance of his economic philosophy of prioritizing commercial endeavors. She criticized current trends supported by "corporate responsibility movements, which encourage corporations to do things other than focus on profit-making," stating the "irony" that such a "diverted focus will undermine corporations’ ability to improve people’s lives." She argued that "objectives like clean air and water, good education and healthcare, and poverty reduction are better achieved by profit-focused corporations than corporations encouraged to pursue these objectives directly."

Further, Commissioner Peirce warned that diverting the focus of those who run a company results in confusion and allows them to pursue self-serving objectives rather than to act in a manner consistent with their fiduciary duty to shareholders. She stated that "[i]t is no different for a corporate executive to claim to be virtuous by spending shareholder money than it is for a politician to signal her generosity by spending taxpayer money." She emphasized the importance for a company of always focusing on maximizing value for shareholders. She also decried "intricately thick regulatory barriers to the formation and financing of companies," and the high costs of compliance.