Corporate power is corporate purpose I: evidence from my hometown

Leo E. Strine

Oxford Review of Economic Policy, 2017, vol. 33, issue 2, 176-187

Abstract: This paper considers a rather tired argument in corporate governance circles, that corporate laws only giving rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. By continuing to suggest that corporate boards themselves are empowered to treat the best interests of other corporate constituencies as ends in themselves, no less important than stockholders, scholars and commentators obscure the need for legal protections for other constituencies. As a case study, this paper examines what happened when an activist investor came to DuPont, illustrating how its board knew that they were expected to make their end investors’ best interests, even if that hurt other constituencies. This isn’t a story about bad people, but a reminder to those genuinely concerned for non-shareholder constituencies to face reality and support changes in the power dynamics affecting corporate governance that make regard for non-shareholder constituencies an obligation for business.

Keywords: short-termism; institutional investors; corporate law; corporations; fiduciary duties; Dodge v. Ford; corporate constituency statutes; corporate governance; social responsibility; CSR; stakeholders; activist investors; myopia; shareholders; boards; managers; DuPont; need for stakeholder protections (search for similar items in EconPapers)
JEL-codes: G30 K22 M14 P12 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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