Many large asset managers are redefining the purpose of American for-profit corporations by pushing companies to shift their priority from shareholders to other stakeholders – anyone potentially affected by a corporation’s actions.
At Strive, we reject this shift. Unlike our competitors, we are unapologetically committed to shareholder primacy and believe the purpose of a for-profit company is to maximize long-run value to investors.
Shareholders vs Stakeholders:
Past, Present, and Future
Past, Present, and Future
More than a century ago, Dodge v. Ford established the principle of shareholder primacy, holding that corporations have a legal obligation to act in the best interests of their investors. With shareholders in the driver’s seat, the U.S. economy took off.
Shareholder capitalism’s rewards for innovation produced the modern world’s greatest inventions, including assembly lines, airplanes, air conditioning, computers, supermarkets, cell phones, and the internet. Shareholder capitalism built the companies that built America.
Then, 50 years ago, the debate over corporate purpose was reignited. University of Chicago Economist Milton Friedman convinced America to rededicate itself to shareholder capitalism while most European countries diverged and implemented stakeholder capitalism.
Fiduciaries, legally obligated to focus solely on financial returns, are incorporating non-pecuniary factors under the guise of considering environmental, social, and governance (ESG) risk factors. The Department of Labor adopted a rule making it easier for pension funds specifically to do that. At the same time, pension plans are lowering their projected long-term returns, risking insolvency.
America has a savings and retirement crisis – the average pension is under 80% funded and the average American only has a little over $100k in their 401(k) accounts. The impact of a 3.45% reduction in forward projected equity returns by rejecting shareholder primacy would be detrimental for all investors.
The Strive Solution
We do not intend to let the economy continue down this path. We aim to increase long-run capital market realized returns and assumptions by restoring free market capitalism by leading companies to focus on excellence.
When the time comes for you to purchase Strive products and solutions for yourself, your clients, or the institution you represent, you can do so with the confidence that our sole obligation is to the financial interests of our clients and that we will always prioritize the shareholder over other stakeholders.
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Connect With Strive Bloomberg, 2023. Total return assumes reinvestment of dividends. Past performance does not guarantee future results. One cannot invest directly in an index; for informational purposes only. This is not investment advice, and one should conduct their own diligence on any investment, including the risks associated, before making an investment decision.
- “Portfolio Balance in 2063″ is hypothetical and provided for illustrative purposes only. This representation is based off of compounding the stated Annual Return with no deductions of fees or other costs that may be associated with an investment. Many risks and other factors may impact investments over time. This is not a promise or guarantee of performance.