The fundamental goal of all business is to maximize shareholder value." This statement can be either commonplace or controversial, depending on where you are. In the United States, top management is traditionally expected to seek to maximize shareholder value. Failure to do so results in pressure from the board of directors and activist shareholders, or even in hostile takeover bids.

Elsewhere in the world, companies make different implicit tradeoffs among their various stakeholders. In continental Europe and Japan, intricate weightings are given to the interests of customers, suppliers, workers, the government, debt providers, equity holders, and society at large. Maximizing shareholder value is often seen as short-sighted, inefficient, simplistic, and even antisocial. Proponents of this "balanced stakeholders" approach cite the high standards of living and rapid economic growth in Europe and Japan and the success of Japanese auto and consumer electronics companies to support their view.

But the evidence against these arguments—and in favor of shareholder wealth maximization—is mounting. This article provides evidence that winning companies have higher productivity, greater increases in shareholder wealth, and greater employment gains than their competitors in the long run. In other words, even in...