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1 results

  • 5 - To Make Stakeholder Capitalism the Rule, You Would Have to Change Most of Corporate Law

  • from Part I - The Law
  • Stephen M. Bainbridge, University of California, Los Angeles
  • Book:
    The Profit Motive
    Published online:
    02 February 2023
    Print publication:
    09 February 2023, pp 73-78

  • Summary

    Proponents of stakeholder capitalism claim that it can be implemented simply by modifying the fiduciary duties of directors so that they can take into account the interests of stakeholders rather than being legally limited to considering shareholder value maximization. Such claims fundamentally misunderstand how deeply embedded shareholder value maximization is in corporate law. Only shareholders get to vote, which means directors get to keep their jobs only if they please shareholders. A web of director and officer fiduciary duties inclines them to shareholder value maximization, as does the law of executive compensation.