In recent commentary on governance failures in South Africa’s listed sector, fund manager Piet Viljoen argued in an issue of his Regarding… newsletter that corporate dysfunction stems from a deviation from the “proper” purpose of the board: creating value for shareholders.

It is an argument rooted in Milton Friedman’s 1970s doctrine, which claimed that executives exist to maximise shareholder profits. But decades of jurisprudence (including from South African courts), global developments and thought leadership show that this view is not only outdated, but fundamentally incorrect.

The idea that directors owe their duty to shareholders is legally wrong. Directors owe their duties to the company and the company alone, a principle consistently upheld by our courts. The company, as a separate legal person, is the beneficiary of fiduciary duty — not its shareholders, executives or creditors.

This is more than a legal technicality. It is a necessary distinction that allows boards to take decisions in the long-term best interests of the organisation, even when those decisions do not immediately or directly advantage shareholders. It is simply not possible — nor desirable — for a board to act in the immediate interests of one stakeholder group while neglecting the long-term sustainability of the enterprise.

South Africa has been a global pioneer in the stakeholder-inclusive approach, which has been part of the King Code since 1994. But this approach is often misunderstood. It does not require directors to “serve all stakeholders” or balance competing interests like an omniscient arbiter — the criticism often levelled at “stakeholder capitalism” in global discourse. Instead, it requires boards to consider the legitimate interests and stakeholder needs, precisely because addressing those interests and concerns are essential to long-term value creation for the company.

This is entirely consistent with the fundamental proposition: the board must prioritise the best interests of the company over time. A company cannot be sustainably successful if it ignores its employees, customers, communities, regulators or the environment. Nor can it create enduring value if it chases short-term gains while eroding trust, reputation or resilience.

Shareholder primacy is not a South African governance principle, and it has also been abandoned by the world’s most influential corporate voices. The global movement is now one of inclusive capitalism, recognising that modern value creation is multidimensional.

In fact, as my research has highlighted, shareholder primacy thinking contributes significantly to the conditions that allow corporate misconduct to flourish: short-termism, narrow metrics and the sidelining of material risks that fall outside immediate financial reporting.

It is telling that many of the failures cited in South Africa — from excessive remuneration to late-stage disaster responses — arise not because the King Codes failed, but because directors, executives and shareholders failed to apply the principles of ethical and effective leadership, integrated thinking and long-term stewardship.

The King philosophy — and now King VTM — places value creation at the centre of governance, but not in the superficial sense of quarter-to-quarter returns. It emphasises ethical and effective leadership, integrated thinking and the creation of value for the organisation and the socio-ecological systems it relies on. This is value creation for the company, not for shareholders narrowly.

Shareholder value, when it is genuinely enduring, is a consequence of good governance, not its purpose. If we are serious about strengthening South Africa’s corporate governance culture, the solution is not to revive an outdated doctrine that global regulators, courts and institutions have already left behind.

Our task is far more important: rebuilding a culture of ethical and effective leadership, accountability and strategic foresight within our boardrooms. Boards do not exist to serve shareholders. They exist to safeguard the company — and in doing so, to ensure it contributes meaningfully to society, the economy and its long-term stakeholders.

Shareholder value will follow, but only if boards lead with integrity, purpose, competence and courage.