American stocks have outdone even the bravest expectations. Over the past 30 years, the S&P 500 has gained an annualized 9.8%, resulting in a compounded return exceeding 1,600%. In 1989, the entire globe’s gross domestic product summed to $20 trillion, expressed in current dollars. Today, publicly traded U.S. equities are worth a collective $30 trillion.
As even the dull-witted have suspected that some of the stock market’s rise owes to changing practices in corporate management. By the late '80s, the concept of “maximizing shareholder value” was widespread. This dictum, initially advanced by Milton Friedman in 1970, had become the received wisdom at MBA programs. Corporate executives answered to one party: their shareholders. Nobody else counted, unless they proved useful to meeting that goal.