Cornell Law Review

In The Illusory Promise of Stakeholder Governance, Lucian Bebchuk and Roberto Tallarita offer a vigorous defense of the view that corporate leaders should have a legal duty to maximize only shareholder value.^{11. Lucian A. Bebchuk & Roberto Tallarita, The Illusory Promise of Stakeholder Governance, 106 CORNELL L. REV. 91 (2020). They define “corporate leaders” as “those individuals, both directors and top executives, who make important corporate decisions.” Id. at 94.} They define “stakeholders” as “all non-shareholder constituencies of the corporation—including employees, customers, suppliers, communities, and the environment.”^{22. Id. at 93.} They criticize the alternative of “stakeholderism”, which they define as “a governance model that encourages and relies on corporate leaders to serve the interests of stakeholders and not only those of shareholders.”^{33. Id. at 91 (emphasis added). See also id. at 94 (similar language).} Although they sometimes call their position “shareholder primacy”, that term is a misnomer because they favor more than a legal duty to primarily advance shareholder interests.^{44. Id. at 104, 106, 110, 139.} They favor what I will call “shareholder exclusivity”, a legal duty to exclusively maximize shareholder interests that forbids corporate leaders from putting any independent weight whatsoever on the interests of non-shareholders.^{55. See id. at 91, 94, 97–98, 110, 114–15, 139 (arguing that the corporate law should allow corporate leaders to consider stakeholder interests only to the extent that doing so would maximize shareholder value and should bar corporate leaders from putting any independent weight on stakeholder interests).}

To understand why, we first need a more detailed explanation of the analysis I offered for my conclusions, which I provide in Part I. I then explain in Part II why none of the arguments in Bebchuk and Tallarita’s article is responsive to my analysis.

To read this Essay, please click here: The Inevitability and Desirability of the Corporate Discretion to Advance Stakeholder Interests.