A Next Generation Finance Textbook Consistent with Sustainability and Flourishing

This proposed session will report on completing a new financial management textbook that begins with the assumption that the role of all business enterprises is to serve society in multiple dimensions, not only economic. The current business and finance paradigm, widely accepted in practice and in academic teaching and research throughout the world, assumes that for-profit companies make the maximum contribution to society by acting to maximize their financial value, commonly referred to as “Shareholder Wealth Maximization (SWM).” However, evidence to the contrary is mounting as is the recognition that a world of firms pursuing SWM yields severe unintended and unwanted side effects—including global unsustainability, growing income inequality, species extinction, ocean warming and acidification, deforestation, climate change, etc.—outcomes that threaten the stability of societies and the habitability of the only planet we have. Finance textbooks, and we suspect almost all finance professors, accept SWM as the goal of the for-profit company without any critical discussion and present analytical and decision-making techniques that take SWM as a given. However, if SWM is not the way for business enterprises to make the maximum contribution to society, many aspects of finance teaching and practice will have to change to be consistent with society’s needs. As Fr. Michael Garanzini remarked in his 2018 IAJBS World Forum luncheon address, new finance textbooks will be required as business schools revise the way finance is taught. This broader vision of the purpose of the firm is a significant theme in Pope Francis’ encyclical Laudato Si’ as well as in numerous other Jesuit and Catholic writings and commitments to social innovation and social enterprise found on many Jesuit and other university campuses. Very recently, business leaders have finally begun to recognize the need for this broader vision. In August 2019, for example, the U.S. Business Roundtable released a statement signed by 181 CEOs of major corporations that said in part: “Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version … issued since 1997 has endorsed principles of shareholder primacy—that corporations exist principally to serve shareholders. … the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility. … Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” At the 2018 IAJBS World Forum we shared plans for a new textbook grounded in the need to create a sustainable world. At the 2019 World Forum we reported on our progress in a paper that was awarded the Tom Bausch Best Paper Award. At the 2020 World Forum we wish to share and discuss the competed book. In a broader perspective, we will discuss how this textbook and other similarly-focused textbooks in each of the business disciplines can be used as vehicles for transforming not only finance teaching and research, but also all of business education and business practice.