1 - The Financialization of Corporate Governance

Summary

There is a robust debate in progress between proponents of shareholder primacy, or the theory that corporations should be run for the benefit of shareholders, and proponents of stakeholder governance, or the theory that corporations should be run for additional constituencies also. Members of the academic community,¹ the business world,² and law firms³ are all participants in the conversation. This is a long-standing controversy, going back to the competing views of Professors Dodd and Berle in the 1930s.⁴ Corporate purpose seems to be questioned whenever loss of faith in the business community leads to clamors for reform. In the midst of the COVID-19 pandemic, there also is a loss of faith in political leadership. Our social, economic, and political problems have been laid bare by the pandemic, and so thinkers about corporate governance are renewing questions about corporate purpose and fiduciary duty.