Maximizing Shareholder Welfare: A Normative Examination of Hart and Zingales’ Corporate Governance Account

Santiago Mejia () and Pietro Bonaldi ()
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Santiago Mejia: Fordham University
Pietro Bonaldi: Carnegie Mellon University

Journal of Business Ethics, 2025, vol. 196, issue 2, No 5, 309-323

Abstract: Abstract In response to the growing criticisms to shareholder primacy, Oliver Hart, a Nobel Economics Prize recipient, and Luigi Zingales, a very well-known finance professor, have offered a revision to Milton Friedman’s dominant account. Seeking to incorporate social and moral concerns into the objective function of the firm, they have proposed that managers should maximize shareholder welfare instead of shareholder value. Their account has been highly influential and reflects many of the substantive and methodological assumptions of corporate governance scholars within the law and economics literature. In this paper, we engage closely with their account from a normative perspective, unearthing and criticizing the implications of many of these assumptions. In doing so, we also formulate a set of principles necessary to ensure the ethical legitimacy of any proposal that puts shareholders at the center of the firm’s objective function.

Keywords: Shareholder primacy; Corporate purpose; Principal-agent ethics; Oliver Hart; Luigi Zingales; Objective function of the firm (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10551-023-05551-5

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