Shareholder Primacy in Corporate Law – A Response to Professor Stout

2013 ◽  
Author(s):  
Peter Watts
Keyword(s):  
Corporate Law ◽  
Shareholder Primacy

scholarly journals New Thinking on "Shareholder Primacy"

2018 ◽  
Author(s):  
Lynn Stout
Keyword(s):  
Stock Price ◽  
Shareholder Wealth ◽  
Corporate Law ◽  
Share Price ◽  
Corporate Structure ◽  
Shareholder Primacy ◽  
Public Companies ◽  
Public Firms ◽  
Wide Range ◽  
New Thinking

2 Accounting, Economics, and Law (2012)By the beginning of the twenty-first century, many observers had come to believe that U.S. corporate law should, and does, embrace a "shareholder primacy" rule that requires corporate directors to maximize shareholder wealth as measured by share price. This Essay argues that such a view is mistaken.As a positive matter, U.S. corporate law and practice does not require directors to maximize "shareholder value" but instead grants them a wide range of discretion, constrained only at the margin by market forces, to sacrifice shareholder wealth in order to benefit other constituencies and the firm itself. Although recent "reforms" designed to promote greater shareholder power have begun to limit this discretion, U.S. corporate governance remains director-centric.As a normative matter, several lines of theory have emerged in modem corporate scholarship that independently explain why director governance of public firms is desirable from shareholders' own perspective. These theories suggest that if we want to protect the interests of shareholders as a class over time-rather than the interest of a single shareholder in today's stock price-conventional shareholder primacy thinking is counterproductive. The Essay reviews five of these lines of theory and explores why each gives us reason to believe that shareholder primacy rules in public companies in fact disadvantage shareholders. It concludes that shareholder primacy thinking in its conventional form is on the brink of intellectual collapse, and will be replaced by more sophisticated and nuanced theories of corporate structure and purpose.

scholarly journals Sustainable Value Creation Within Planetary Boundaries—Reforming Corporate Purpose and Duties of the Corporate Board

2020 ◽  
Vol 12 (15) ◽  
pp. 6245
Author(s):  
Beate Sjåfjell
Keyword(s):  
Value Creation ◽  
Social Norm ◽  
Corporate Law ◽  
Law Reform ◽  
Corporate Board ◽  
Legal Form ◽  
Shareholder Primacy ◽  
The Social ◽  
Sustainable Value ◽  
The Eu

Business, and the dominant legal form of business, that is, the corporation, must be involved in the transition to sustainability, if we are to succeed in securing a safe and just space for humanity. The corporate board has a crucial role in determining the strategy and the direction of the corporation. However, currently, the function of the corporate board is constrained through the social norm of shareholder primacy, reinforced through the intermediary structures of capital markets. This article argues that an EU law reform is key to integrating sustainability into mainstream corporate governance, into the corporate purpose and the core duties of the corporate board, to change corporations from within. While previous attempts at harmonizing core corporate law at the EU level have failed, there are now several drivers for reform that may facilitate a change, including the EU Commission’s increased emphasis on sustainability. Drawing on this momentum, this article presents a proposal to reform corporate purpose and duties of the board, based on the results of the EU-funded research project, Sustainable Market Actors for Responsible Trade (SMART, 2016–2020).

scholarly journals Resilience: the resumption of shareholder primacy

2008 ◽  
Vol 5 (2) ◽  
pp. 146-151
Author(s):  
Alex Proimos
Keyword(s):  
Corporate Governance ◽  
Stakeholder Theory ◽  
General Public ◽  
Corporate Law ◽  
Shareholder Primacy

The once dominant and inconsiderate player in corporate governance, the shareholder, has faced increasing pressure from its rival stakeholders (creditors and the general public) and their agents (i.e. the management and directors) eager to unproportionately increase their stake. The idea of shareholder primacy in corporate governance is while previously was losing its dominance as corporate law versus stakeholder theory could be set for an even stronger come back.

scholarly journals Supreme Court Restates Directors' Fiduciary Duty - A Comment on Peoples Department Stores v. Wise

2020 ◽  
pp. 383-405
Author(s):  
Darcy L. MacPherson
Keyword(s):  
Supreme Court ◽  
Case Law ◽  
Corporate Law ◽  
Fiduciary Duty ◽  
Best Interests ◽  
Large Element ◽  
Supreme Court Of Canada ◽  
Department Stores ◽  
Shareholder Primacy ◽  
The Law

This article considers the implications of the recent Supreme Court of Canada decision in Peoples Department Stores v. Wise for the law of directors' fiduciary duties. The Court’s decision is attacked on two grounds. First, the author criticizes the Court’s interpretation and treatment of the phrase "the best interests of the corporation" as found in the Canada Business Corporations Act. It is argued that the decision in Wise rejects the traditional interpretation of this phrase which was previously accepted to mean "the best interests of the shareholders collectively. " This rejection raises the spectre of the debate between the "shareholder primacy " model of directors' duties and broader "pluralist" alternatives. By undercutting the lynchpin of the "shareholder primacy" model, the author suggests that the Court has left a vacuum in the law because the Court failed to outline what is to replace this traditional interpretation, or even to acknowledge the substantive change being made. At the level of process, it is equally suggested that the revision of important principles in corporate law exclusively through the judiciary is fundamentally undesirable, where the law of directors' duties has such a large element of public policy attached to it. The author also proposes that the decision in Wise has resulted in an unacceptable level of uncertainty in the law, and that this uncertainty was neither necessary nor advisable to resolve the case before the Court. Second, the author criticizes the Court's comments indicating that a breach of fiduciary duty requires mala fides on the part of directors. It is argued that this is inconsistent with pre-existing case law.

scholarly journals Controversies about agency theory as theoretical basis for corporate governance

2016 ◽  
Vol 7 (4) ◽  
pp. 613
Author(s):  
Jan Kultys
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Theoretical Basis ◽  
Corporate Law ◽  
Management Theory ◽  
Traditional Theory ◽  
Stewardship Theory ◽  
Ongoing Debate ◽  
Shareholder Primacy ◽  
Efficient Management

The issue of corporate governance is being taken up by different branches of science. Particular views on the nature and goals of a firm, as well as on corporate law, determine various approaches to the issue. The ongoing debate on corporate governance is being stimulated by notorious scandals and economic crises. The agency theory (prevailing today), which assumes egoism and pursuit of one’s own interests, forms the basis for shareholder primacy model, while team production theory forms the basis for director primacy model. Stewardship theory, which assumes convergence of management’s and stakeholders’ interests, may be competing or complementary towards the agency theory, depending on situation. According to management theory, efficient management requires law regulation of managers’ status. This paper is aimed at presenting controversies about traditional agency theory as theoretical basis for corporate governance, as well as at discussing other perspectives on the issue, which are extensions of the traditional theory or are based on substantially different premises. The analysis shows that going beyond agency theory allows for better understanding of the whole range of models of corporate governance as well as of the changes that are being proposed in the area. The method utilized in this paper is descriptive and comparative in character.

scholarly journals A Team Production Theory of Canadian Corporate Law

2015 ◽  
pp. 299 ◽  
Author(s):  
Stephanie Ben-Ishai
Keyword(s):  
Power Relations ◽  
Voting Rights ◽  
Corporate Law ◽  
Stakeholder Group ◽  
Production Theory ◽  
Direct Control ◽  
Team Production ◽  
Shareholder Primacy ◽  
Share Ownership ◽  
Public Corporations

The article applies the Team Production Theorydeveloped by American corporate law scholars, Margaret Blair and Lynn Stout, to argue that Canadian corporate law's understanding of public corporations that are not controlled by a single shareholder or group of shareholders reflects a director primacy norm rather than a shareholder primacy norm. Canadian corporate law provides that directors of such public corporations with widely-held share ownership and voting rights are free from direct control by any corporate stakeholders. A potential departing point for Canadian corporate law. the oppression remedy, continues to develop to deal with extra-legal advantages rooted primarily in unequal power relations among corporate stakeholders.  However, in its current and predicted future applications, the oppression remedy does not provide any given stakeholder group with an ability to dominate the boards of public corporations and obviate the director primacy norm. The article suggests that because the director primacy norm accurately describes Canadian corporate law, further consideration needs to be given to corporate law's relative relevance in dictating how Canadian corporations currently operate.

Sign in / Sign up

Export Citation Format

Share Document