v7n6: Silver on Sollars and Tuluca on Portfolio Theory and Shareholder PrimacyPosted: September 23, 2019 Filed under: Uncategorized Leave a comment
Modern Portfolio Theory and Shareholder Primacy, by Kenneth Silver
A COMMENTARY ON Gordon G. Sollars and Sorin A. Tuluca (2018), “Fiduciary Duty, Risk, and Shareholder Desert,” Bus Ethics Q 28(2): 203–218, https://doi.org/10.1017/beq.2017.47
Shareholders assume risk by investing. Sollars and Tuluca (2018) argue that while this does not justify a managerial policy of shareholder wealth maximization, it does justify compensating shareholders at the often- calculated cost of equity—the cost that investors require given the level of risk they assume. Here, I show that this can be unfair if the cost of equity is unfair. I then show how shareholder wealth maximization as a managerial imperative is better justified on other grounds.
To download the full PDF, click here: Silver on Sollars and Tuluca
Kenneth Silver is an Assistant Professor in Business Ethics within Trinity Business School at Trinity College Dublin, The University of Dublin.