This is part I of a series of blog posts looking at the corporate objective and practical steps that could be taken to further either shareholder primacy or stakeholderism.
“It makes a great difference in my attitude towards my job as an executive officer of the General Electric Company whether I am a trustee of the institution or an attorney for the investor. If I am a trustee, who are the beneficiaries of the trust? To whom do I owe my obligations?”1
– Owen D. Young (1929)
Determining the corporate objective has been said to be the “most important theoretical and practical issue confronting us today”2 and has been the subject of much literature. In 2000, Hansmann and Kraakman controversially declared ‘an end of history for corporate law’3. A decade later, in light of major governance crises in the early 2000s and the recent financial crisis, the question of who the company should favour is less settled than ever4.
In this paper I shall, after considering the current state of company law and governance, put forward potential reforms which seek to further the competing theories of shareholder primacy and stakeholderism.
I shall first argue, with regards to shareholder primacy (part II), that the UK already presents one of the most shareholder-centered systems. I shall, nonetheless, put forward proposals to enhance their position, with the primary aim of reducing agency costs and improving company law and corporate governance in light of dispersed share-holding.
Turning to stakeholderism (part III), I shall then argue that the current position of stakeholders under company law is deficient and will explore a number of proposals including a remedy-based approach for the protection of their interests, a new method for adjudicating disputes, direct board representation, and wider disclosure duties.
- Owen D. Young (1929) cited in E. Merrick Dodd, ‘For Whom are Corporate Managers Trustees?’  45 Harvard Law Review at 1145 [↩]
- James Walsh, ‘Introduction to the “Corporate Objective Revisited” Exchange’  15 Organization Science at 349 [↩]
- Henry Hansmann and Reinier Kraakman, ‘The End Of History For Corporate Law’  89 Georgetown Law Journal at 439 [↩]
- See for eg: The Economist, ‘Shareholders v stakeholders: A new idolatry’ [April 22nd 2010] [↩]