From The Origin Of ‘The World’s Dumbest Idea’: Milton Friedman:
“No popular idea ever has a single origin. But the idea that the sole purpose of a firm is to make money for its shareholders got going in a major way with an article by Milton Friedman in the New York Times on September 13, 1970.
… Friedman’s article was ferocious. Any business executives who pursued a goal other than making money were, he said, “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” They were guilty of “analytical looseness and lack of rigor”.
… The success of the article was not because the arguments were sound or powerful, but rather because people desperately wanted to believe … The idea of focusing totally on making money, and forgetting about any concerns for employees, customers or society seemed like a promising avenue worth exploring, regardless of the argumentation.
… to ensure that the firms would focus solely on making money for the shareholders, firms should turn the executives into major shareholders, by affording them generous compensation in the form of stock.
… Sadly, as often happens with bad ideas that make some people a lot of money, shareholder value caught on and became the conventional wisdom.
… Politics also lent support.
… So for a time, it looked as though the magic of shareholder value was working. But once the financial tricks that were used to support it were uncovered, the underlying reality became apparent.
… The shareholder value theory thus failed even on its own narrow terms: making money … In the period of shareholder capitalism since 1976, executive compensation has exploded while corporate performance declined.
… Not everyone agreed with the shareholder value theory, even in the early years. … Quaker Oats president Kenneth Mason, writing in Business Week, declared Friedman’s profits-are-everything philosophy “a dreary and demeaning view of the role of business and business leaders in our society… Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life; life’s purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit.”
… In effect, shareholder value is obsolete.“
via Matt Mullenweg