Corporations and finance

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Chapter 6 in Evolution of the Corporation in the United States, 2021, pp 102-113 from Edward Elgar Publishing

Abstract: The idea that the primary corporate purpose is to increase shareholder wealth arose early in the twentieth century. Separation of management from ownership emphasizes the role of boards of directors. Law requires directors to act in the best interests of the corporation. Enunciated in Dodge et al. v. Ford Motor Company the requirement has been embedded in the Model Business Corporation Act followed by many states. The business judgment rule immunizes directors from challenges for decisions made for the best interests of the corporation. Typically, the best interests of the corporation are equated with increasing shareholder wealth. This has resulted in the use of corporate revenues, including from tax cuts and borrowing, for stock buybacks increasing the value of stock without changing productive capacity.

Keywords: Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2021
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