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.S.economy over the past several decades.Such an analysis suggests that financialization represents a broader transformation of the economy, with deeper historical roots, than is indicated by a focus on speculative manias.Shareholder ValueThe sociological literature on the emergence of “shareholder value,” developed primarily by organizational theorists, offers a second perspective on the rise of finance in the U.S.economy.This literature broadens the analysis from processes internal to financial markets to examine the relationship between nonfinancial firms, financial sector actors, and the state in creating and enforcing a new paradigm for management.The concerns of this literature are somewhat orthogonal to the literature on speculative manias, as the objective is not to explain how speculative bubbles emerge and develop, but rather to examine the growing orientation of nonfinancial firms to financial markets (Davis 2009).Although these are ostensibly quite different problems, both are relevant for the more general problem of understanding why finance and financial activities have assumed greater salience in the economy in recent years.The literature on shareholder value contains multiple strands, but it is possible to distill from various contributions a more or less unified account of the basic transformations driving the turn to finance in the U.S.economy in recent decades (e.g., Davis 2009; Davis, Diekmann, and Tinsley 1994; Davis and Stout 1992; Davis and Thompson 1994; Dobbin and Zorn 2005; Fligstein 2001, 2005; Lazonick and O’Sullivan 2000; Useem 1996; Zorn et al.2004).The notion of “shareholder value” refers to the idea that the sole purpose of the firm is to return value—in the form of an appreciating share price—to the owners of the company.The central question raised by this literature is how shareholder value became the privileged metric for assessing corporate success (or failure) in the 1980s and 1990s13—with attendant changes in corporate governance that have drawn nonfinancial firms increasingly into the orbit of financial markets.Rather than viewing this development simply as an “efficient” solution to problems posed by the separation of ownership and control of corporations,14 sociologists offer a nuanced historical account that sees the emergence of shareholder value as the outcome of a fundamental reconceptualization of the nature of the firm (Davis 2009; Davis, Diekmann, and Tinsley 1994; Espeland and Hirsch 1990; Fligstein 2001).According to this account, the shareholder value revolution rested on an earlier transformation in which firms came to be viewed as “bundles of assets” rather than as bounded entities with discrete organizational identities centered on a product or industry (Davis 2009; Espeland and Hirsch 1990; Fligstein 1990, 2001).This “portfolio theory of the firm” was associated with the construction of large conglomerates in the 1950s and 1960s in which risk diversification was achieved by combining firms in unrelated industries, much as a mutual fund attempts to diversify risk by spreading capital across unrelated investments.The creation of these sprawling enterprises was encouraged by the passage of a law in 1950 restricting horizontal and vertical mergers, with the result that in order to grow, firms had to combine businesses in unrelated lines.The conglomerate strategy was also promoted by finance executives, whose own power inside firms rose with the growing size of corporate behemoths as these executives had unique technical expertise to evaluate the performance of subunits in different industries (Fligstein 1990; cf.Zorn 2004).Paradoxically, because the portfolio view of the firm treated “businesses.[as] mere commodities for trading in the marketplace as casually as a sack of sugar or a suburban house” (Sloan 1985: 134), finance executives were also best equipped to oversee the dismantling of conglomerate enterprises when competitive conditions in the economy changed beginning in the 1970s (Davis, Diekmann, and Tinsley 1994; Fligstein 2001).Once the firm was conceptualized as a stream of cash flows to be shuffled and reshuffled in whatever configuration would produce the highest return (Espeland and Hirsch 1990), a number of transformations occurring in the institutional environment of firms gave this conception the more specific imprint of shareholder value.The first and arguably most important of these changes was the emergence of a corporate takeover market in the early 1980s—a result of deteriorating macroeconomic conditions, changes in state policy, and a series of financial innovations occurring in this period (Davis and Stout 1992; Davis and Thompson 1994; Dobbin and Zorn 2005; Lazonick and O’Sullivan 2000; Stearns and Allan 1996).In particular, the inflation of the 1970s had the contradictory effect of inflating the value of corporate assets (plant and equipment) while depressing stock prices, with the result that the book value of many firms exceeded their market value.In this context, there was money to be made by buying firms at depressed prices and selling the assets at a profit (Fligstein 2001).These profit opportunities were merely theoretical, however, until the Reagan administration relaxed anti-trust restrictions on intra-industry mergers in 1982.This more permissive regulatory environment, together with the creation of new financial instruments such as the junk bond, unleashed a hostile takeover wave that reconfigured the economic landscape.The resulting reorganization of the American economy broke up large conglomerates in favor of leaner, more focused firms and fixed executive attention relentlessly on the stock price (because a low valuation in the stock market invited takeover attempts).A second major transformation—the emergence of institutional investors as powerful new intermediaries in financial markets (Useem 1996)15—reinforced executives’ newfound obsession with the stock market (Dobbin and Zorn 2005; Lazonick and O’Sullivan 2000).Institutional investors exerted pressure on firms in a number of ways, but one of the most pernicious was their insistence that executives receive compensation in the form of stock options.Stock options are warrants that allow the holder to purchase the company’s stock at the current price for some specified period of time into the future.Thus, if the price of the company’s stock increases between the time the option is issued and the time it is exercised, the holder can effectively buy stock at below the market price and then turn around and sell the shares for a tidy (and riskless) profit.Taken together, these changes had a profound effect on the behavior of firms, with the threat of takeover acting as stick and stock options as carrot to fulfill the imperatives of financial markets, whether through selling off unprofitable divisions (Davis, Diekmann, and Tinsley 1994), laying off workers (Fligstein and Shin 2007; Lazonick and O’Sullivan 2000), or engaging in financial engineering that allowed firms to meet analysts’ quarterly earnings projections (Dobbin and Zorn 2005) [ Pobierz całość w formacie PDF ]