Naked Capitalism has the article How Milton Friedman Fomented the Barmy “Corporations Exist to Maximize Shareholder Value” Myth  by Yves Smith.

One of my pet peeves is the degree to which the notion that corporations exist only to serve the interests of shareholders is accepted as dogma and recited uncritically by the business press. I’m old enough to remember when that was idea would have been considered extreme and reckless. Corporations are a legal structure and are subject to a number of government and contractual obligations and financial claims. Equity holders are the lowest level of financial claim. It’s one thing to make sure they are not cheated, misled, or abused, but quite another to take the position that the last should be first.

I am a sucker for any article that would call Milton Friedman or any of his ideas “barmy”. Later the article quotes a Friedman article that said the following:

In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

Yves Smith then goes on to see how ill founded these thoughts are.

You can see how incoherent this is. Shareholder are not bosses of corporate executives. They are diffuse and large in number, and if you got them all in a room to tell the corporate executive what to do, you’d be more likely to see fisticuffs than agreement.

The trick that is being pulled on us here is the usual sophistry that gets the listeners into trouble.  The concept of boss and owner implies many characteristics.  The shareholder has some of the characteristics of a boss and some of the characteristics of an owner, but not all the characteristics of either one.  The sophist’s trick is  to get you to agree with the similarity of the shareholder with a boss or owner without specifying in what way they are alike and in what ways they are not alike.  The sophist makes an absurd point by  using aspects where they are not alike before you can realize how you are being duped.

It might be worth imagining why the citizens in a democracy would want their government to create the legal concept of a corporation.  Would the citizens of that democracy really want the government to set up a corporation for the sole purpose of making a few people wealthy, or would they want it done for some larger social purpose?