The author isn't arguing against maximizing shareholder value, he's highlighting the misunderstanding of what maximizing shareholder value is. Current intro-level schools of thought on how to value projects, raise money for those projects, and what to do with the money left over, start with a perfect-world scenario [1]. This scenario's cornerstone centers around the idea markets are perfectly efficient, there are no taxes, management incentives align with shareholders, there are no taxes, there are no bankruptcy costs, and possibly one more.
In this world, there is no difference in value to a company to raise money via debt or via equity. However, if we start to violate the 5-6 founding assumptions (i.e. we enter the real world) we find that there significant differences in value of a firm in a given industry who use debt or equity to raise money (or any flavor of security between debt and equity), who pay management via different bonus structures, who keep cash on hand versus pay it out, have underlying assets which are easily saleable or not, and who have different risk profiles.
Maximizing shareholder value is a nice tool to use when evaluating key financial decisions (e.g. how levered a firm should be), but as the other points out is misused or abused due to misaligned management incentives. However, tbe idea isn't intrinsically dumb, the misunderstanding of the value of the idea and how it should be used is what's sometimes wrong and sometimes harmful.
In this world, there is no difference in value to a company to raise money via debt or via equity. However, if we start to violate the 5-6 founding assumptions (i.e. we enter the real world) we find that there significant differences in value of a firm in a given industry who use debt or equity to raise money (or any flavor of security between debt and equity), who pay management via different bonus structures, who keep cash on hand versus pay it out, have underlying assets which are easily saleable or not, and who have different risk profiles.
Maximizing shareholder value is a nice tool to use when evaluating key financial decisions (e.g. how levered a firm should be), but as the other points out is misused or abused due to misaligned management incentives. However, tbe idea isn't intrinsically dumb, the misunderstanding of the value of the idea and how it should be used is what's sometimes wrong and sometimes harmful.
[1] http://en.m.wikipedia.org/wiki/Modigliani%E2%80%93Miller_the...