This breathed fresh life into an old idea—that shareholders had the whip hand. Technically, shareholders do not own a company: the firm is a legal person and a share represents a bundle of entitlements to dividends and voting powers. But a doctrine of “shareholder primacy” had been outlined in 1919, when a Michigan court observed that “a business corporation is organised and carried on primarily for the profit of stockholders”. The new science of corporate finance revolutionised the pursuit of that goal. Managers realised that by working out where firms employed capital and using it more efficiently they could increase their value.
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