From Primacy to Commitment: Revising corporate governance theories to account for recent legal innovations in the US

Kevin Levillain (kevin.levillain@mines-paristech.fr) and Blanche Segrestin (blanche.segrestin@mines-paristech.fr)
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Kevin Levillain: CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique
Blanche Segrestin: CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique

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Abstract: For more than twenty years now, Corporate Governance scholars have hesitated between shareholder, director and stakeholder primacy, making the purpose of the corporation " the most important issue in corporate law ". In this paper, we conduct an extensive review of the arguments supporting either of these views in the US context, which shows that analyzing corporate governance through the lens of " primacy " inevitably leads to inconsistent and contradictory interpretations. In the current exploration of new business practices to deal with urgent societal challenges, this misinterpretation undermines the search for conditions to temper the dominant " shareholder value maximization " norm without jeopardizing control and efficiency. Instead we show that interpreting recent US legal innovation requires to drop the concept of " primacy " and to view corporate law as enabling a variety of distribution of decision rights between shareholders and directors. In this light, our model shows that if one is to foster companies' responsible behaviors, it appears necessary to secure both shareholders' and directors' commitment towards a broader purpose. This " commitment " model opens avenues for designing new effective governance practices, including the recent " Benefit Corporation " forms.

Date: 2018-06
New Economics Papers: this item is included in nep-law
Note: View the original document on HAL open archive server: https://hal.science/hal-01777788v1
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Citations: View citations in EconPapers (2)

Published in EURAM, Jun 2018, Reykjavik, Iceland

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