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Shareholders vs Stakeholders

Past, Present, and Future

Putting
Shareholders First

Many large financial institutions are redefining the purpose of American for-profit corporations by pushing companies to shift their priority from shareholders to other stakeholders – anyone potentially affected by a corporation’s actions.

At Strive, we reject this shift. Watch the video to learn how we are standing up for shareholders. Learn about the history of stakeholder capitalism and the impact it could have on your portfolio by reading below.

Past

Past

More Than a Century Ago...

Dodge v. Ford established the principle of shareholder primacy, holding that corporations have a legal obligation to act in the best interests of their investors. With shareholders in the driver’s seat, the U.S. economy took off.

Shareholder capitalism’s rewards for innovation produced the modern world’s greatest inventions, including assembly lines, airplanes, air conditioning, computers, supermarkets, cell phones, and the internet. Shareholder capitalism built the companies that built America.

Then, 50 years ago, the debate over corporate purpose was reignited. University of Chicago Economist Milton Friedman convinced America to rededicate itself to shareholder capitalism while most European countries diverged and implemented stakeholder capitalism.

Present

Historical Data Shows Shareholder Capitalism Has Outperformed

America and Europe not only experienced a significant divergence in ideas, but they also experienced a significant divergence in outcomes. Over the past 35+ years, American shareholder capitalism has outperformed European stakeholder capitalism by 3.45% annualized, as exemplified in the graph.

Shareholders Given a Back Seat

Despite the data, shareholder capitalism in America is at risk once again. In 2019, the country’s most influential corporations signed the Business Roundtable statement, which attempts to redefine the purpose of a corporation and explicitly rejects shareholder primacy.

Everyone Feels the Impact

Fiduciaries, legally obligated to focus solely on financial returns, are incorporating non-pecuniary factors under the guise of considering environmental, social, and governance (ESG) risk factors. The Department of Labor adopted a rule making it easier for pension funds specifically to do that. At the same time, pension plans are lowering their projected long-term returns, risking insolvency.

America has a savings and retirement crisis – the average pension is under 80% funded and the average American only has a little over $100k in their 401(k) accounts. The impact of a 3.45% reduction in forward projected equity returns by rejecting shareholder primacy would be detrimental for all investors.

How would 3.45% impact a $100,000 portfolio over 40 years?2

Future

The Strive Solution

We do not intend to let the economy continue down this path. We aim to increase long-run capital market realized returns and assumptions by restoring free market capitalism and leading companies to focus on excellence.

When the time comes for you to purchase Strive products and solutions for yourself, your clients, or the institution you represent, you can do that knowing that our sole obligation is to the financial interests of our clients and that we will always put shareholders first.

Learn More About Strive

Explore Our ETFs

Take a deep dive into our funds, which provide investment options comparable to existing large asset managers.

 See Strive's Funds

Corporate Governance

Discover how we use our voice and vote to lead companies to focus on excellence, as well as our full voting history.

 Corporate Governance

Start Your Journey with Strive

Take the first step toward a financial strategy that truly reflects your goals by learning more about Wealth Management.

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  1. Bloomberg, 2023. Total return assumes reinvestment of dividends. Past performance does not guarantee future results. One ​cannot invest directly in an index; for informational purposes only. This is not investment advice, and one should conduct their​ own diligence on any investment, including the risks associated, before making an investment decision​.
  2. “Portfolio Balance in 2063″ is hypothetical and provided for illustrative purposes only. This representation is based off of compounding the stated Annual Return with no deductions of fees or other costs that may be associated with an investment. Many risks and other factors may impact investments over time. This is not a promise or guarantee of performance.

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