Shareholder Primacy as an Untenable Corporate Norm

Yong-Shik Lee

Annals of Corporate Governance, 2023, vol. 8, issue 1, 1-50

Abstract: A seminal case in corporate law, Dodge v. Ford Motor Co., set the cardinal principle that corporations must serve the interests of shareholders rather than the interests of employees, customers, or the community. This principle, referred to as “shareholder primacy,” has been considered a tenet of the fiduciary duty owed by corporate directors. The shareholder primacy norm has influenced corporate behavior and encouraged short-term profit-seeking behavior with significant social ramifications. Corporations have been criticized for undermining the interests of employees, customers, and the community in the name of profit maximization. This monograph argues that corporate interests and broader social interests, such as benefits to consumers and employees, are not mutually exclusive and can be reconciled by allowing corporate managers and majority shareholders to define corporate interests more broadly, beyond the narrow confines of shareholder primacy.

Date: 2023
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