In the modern corporate landscape, especially with publicly traded companies, there is a choice that they can make.  They can prioritize delivering a quality customer-driven approach to their products and services or take an opposite tack and focus on driving shareholder value, which has only proven to drive those organizations into oblivion eventually, and it is driving the ultimate destruction of humanity along with it. Boeing has become a shining example of how a once engineering excellence-driven organization succumbed to the shareholder-driven exploitation of the organization after the acquisition of McDonnell Douglas in 1997.

The corporate drive to maximize shareholder value can harm humanity by prioritizing short-term profits over long-term sustainability, ethical considerations, and broader societal well-being. Organizations prioritizing shareholder value should be banned or excluded from all forms of ESG reporting as they do not prioritize ESG actions. Here’s how this dynamic unfolds:

Environmental Degradation

Short-Term Focus: Companies driven by maximizing shareholder value typically focus on short-term financial gains, which can lead to environmental degradation. For example, industries like fossil fuels, mining, and agriculture may prioritize profits over sustainable practices, leading to deforestation, pollution, and climate change.

Consequences: The pursuit of profit can exacerbate global warming, ocean acidification, and biodiversity loss, which, if left unchecked, could cause severe ecological collapse, endangering the survival of human civilizations.

While not limited to mining and commodity extraction companies, a shining example here is ExxonMobil, which continues to push the limits of operational safety and environmental protection practices in many aspects of their business with a legacy of mishaps that has created continuing damage and repercussions to our environment and the planet.

Social Inequality and Exploitation

Cost-Cutting Measures: To maximize profits, corporations may suppress wages, reduce employee benefits, and offshore jobs to regions with weak labour protections. This increases economic inequality and undermines workers' rights, leaving vast sections of the population vulnerable.

Automation: The relentless pursuit of efficiency may also drive companies to replace human workers with machines or artificial intelligence, leading to mass unemployment, social unrest, and further widening wealth disparities.

Amazon is a standout in this category based on their methods for cost containment in their warehouse operations across North America that focus on low wages and poor safety standards. Also, they utilize business intelligence across all sales on Amazon to determine lucrative/high-margin products that they can create as Amazon-branded equivalent manufactured in offshore factories to offer on their site and undercut domestic/nearshore brands.

Corporate Capture of Government and Regulation

Lobbying and Influence: Corporations with significant resources will leverage their financial power to influence government policies, regulations, and elections. This can lead to policies prioritizing corporate profits over public welfare, undermining democratic governance and eroding trust in institutions.

Deregulation: When corporations push for deregulation to maximize profits, important safeguards on environmental protection, consumer rights, and financial stability can be weakened, potentially leading to financial collapses or environmental disasters.

 The most obvious example that is now a historical legacy is the years of Big Tobacco companies that engaged in significant lobbying campaigns that reduced tobacco control policies, quashed public health measures, and ensured that they could continue to promote their products despite the obvious human health hazards.  More recently, it has become clear that Big Plastic has been making similar captures of regulatory influence by perpetuating the myth that most plastics are recyclable.

Resource Depletion

Unsustainable Practices: Companies that focus on maximizing shareholder value will work to exploit finite natural resources (e.g., fossil fuels, minerals, and water) without concern for future scarcity. Overexploitation of resources could result in shortages, conflicts, and societal breakdown as vital supplies dwindle.

Planetary Boundaries: Ignoring the limits of Earth’s ecosystems—concerning pollution, resource consumption, or species extinction—can push humanity closer to catastrophic thresholds that could destabilize the planet’s capacity to support life.

There have been several examples of water bottling companies in North America setting up plants and then outpacing aquifers and water sources faster than they can replenish.  Palm Oil Plantations in countries like Indonesia and Malaysia also overrun resources to prioritize production.  Sime Darby and IOI Group have been continuing practices of extensive deforestation to expand Palm Oil Plantations.

Technological Risk and Ethical Oversight

Unchecked Innovation: In sectors like biotechnology, artificial intelligence, and data privacy, the focus on profit maximization can encourage companies to push ahead with potentially dangerous technologies without fully considering ethical implications or long-term societal impacts.

AI and Automation: For instance, as corporations seek to enhance shareholder value through AI, automation, and data exploitation, they may neglect the societal risks of these technologies, including job displacement, surveillance, and the concentration of power in the hands of a few tech giants.

The Cambridge Analytica scandal with Facebook (Meta) is a prime example of ignoring ethical oversight and technological risk by exploiting data available within the Facebook ecosystem without the knowledge or consent of the users on that platform.

Erosion of Ethical Standards

Moral Hazard: By focusing exclusively on increasing shareholder wealth, companies may engage in unethical practices, such as tax evasion, predatory lending, or marketing harmful products (e.g., unhealthy food, addictive substances). These actions prioritize financial returns over societal well-being, deteriorating public trust and social cohesion.

Short-Termism: Corporations driven by short-term financial targets may prioritize immediate profits at the expense of long-term investments in innovation, social responsibility, and environmental stewardship. This short-termism can create systemic risks that ultimately harm global stability.

While there are so many, my prime example is Enron. Enron's executives engaged in extensive accounting fraud and unethical practices to inflate the company's financial performance and stock price, prioritizing shareholder value over ethical standards. This ultimately led to the company's collapse in 2001, resulting in significant financial losses for shareholders and employees and eroding public trust in corporate governance.

Finally:

The key disconnect that these organizations don’t understand is that the shareholders in the organization are typically not their customers.  Running the business into the ground for a small group of people who don’t care about the business itself or the customers of that business becomes a zero-sum game that ends in disaster almost every time.

While maximizing shareholder value has been a key driver of corporate strategy for decades, its singular focus on short-term financial returns can lead to negative externalities that affect society, the environment, and even the long-term viability of businesses themselves. If unchecked, this drive can contribute to economic inequality, environmental collapse, and the erosion of social and ethical norms, potentially leading to large-scale harm to human existence on this planet.

To avoid these consequences, some experts argue for stakeholder capitalism, which emphasizes a more balanced approach that includes the interests of employees, customers, communities, and the environment alongside shareholders. However, achieving such a shift requires structural changes in governance, regulation, and corporate behaviour that we are not seeing today.