The Illusory Promise of Stakeholder Governance
Lucian A. Bebchuk, James Barr Ames Professor of Law, Economics, and Finance, and Director of the Program on Corporate Governance, Harvard Law School
Roberto Tallarita, Terence M. Considine Senior Fellow in Law and Economics, and Associate Director of the Program on Corporate Governance, Harvard Law School
To address growing concerns about the negative effects of corporations on their stakeholders, supporters of stakeholder governance (“stakeholderism”) advocate a governance model that encourages and relies on corporate leaders to serve the interests of stakeholders and not only those of shareholders. We conduct a conceptual, economic, and empirical analysis of stakeholderism and its expected consequences. Stakeholderism, we conclude, is an inadequate and substantially counterproductive approach to addressing stakeholder concerns.