There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
Milton Friedman 1962
Everyone repeats it like a law of nature: a company’s job is to maximize shareholder value. Behind the mantra what do we find? A person. Or two. Or three. Every company begins with a founder.
Sometimes an accidental founder, sometimes a co‑founder team; but it takes one person to take that first step.
At that moment, the phrase “maximize shareholder value” is wholly aligned with one human’s incentives and choices. Corporate maxims are useful frames for public debates but they are blunt instruments when used to explain individual choices.
Founders make tradeoffs every day
What to build, when to raise money, whom to hire, how to price, whether to accept an acquisition. Such tradeoffs reflect a mix of ambition, risk tolerance, legacy thinking, and limited bandwidth.
If you treat the shareholder‑value mantra as mechanical, you will miss why firms must sometimes prioritize short‑term returns or pursue audacious long shots. The moves often make even more reasonable sense when they are extensions of a founder who maintains control of the company. Then the realized preferences: scaling fast, cheating to stay in control, naming buildings, inventing for the love of inventing — may indeed be maximizing the key shareholder’s value even if you disagree.
For investors trying to understand a company’s long‑term prospects, instead of asking does this decision maximize shareholder value? Determine: how concentrated is the company’s ownership and management. The more concentrated,the more likely the company’s strategy will reflect one person’s horizon and values.
This is often a competitive advantage
Founder‑led firms can be decisive, mission‑driven, and patient. Governance risk creeps in when the founder’s incentives no longer remain in sync with the realized dilution.
Look under the map of maximizing shareholder value to contemplate the human terrain dictating the levers responsible for the company’s trajectory.
My goal is to invite investors, managers, and students to think about companies not as machines but as the unfolding decisions of people who started them.
