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Shareholder primacy or stakeholder governance?

Author

Listed:
  • Schoenmaker, Dirk
  • Schramade, Willem

Abstract

Externalities happen largely in the private sector and cannot be fully separated from production decisions. Decision-making in companies thus co-determines the degree of sustainability of an economy. Advances in impact valuation allow us to express the stakeholder interests in finance and valuation terms. We can thus compare investment decisions and payout decisions for three types of models: the shareholder value model, the shareholder welfare model, and the stakeholder model. Our results show that stakeholder-driven companies are better able to pursue a sustainable economy. Corporate governance should be adjusted accordingly.

Suggested Citation

  • Schoenmaker, Dirk & Schramade, Willem, 2024. "Shareholder primacy or stakeholder governance?," Finance Research Letters, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s154461232401273x
    DOI: 10.1016/j.frl.2024.106244
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    References listed on IDEAS

    as
    1. Marc Fleurbaey & Grégory Ponthière, 2023. "The Stakeholder Corporation and Social Welfare," Journal of Political Economy, University of Chicago Press, vol. 131(9), pages 2556-2594.
    2. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    3. Hart, Oliver D. & Zingales, Luigi, 2022. "The New Corporate Governance," Working Papers 317, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    4. Hart, Oliver D. & Zingales, Luigi, 2017. "Companies Should Maximize Shareholder Welfare Not Market Value," Working Papers 267, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    5. Oliver D. Hart & Luigi Zingales, 2022. "The New Corporate Governance," NBER Working Papers 29975, National Bureau of Economic Research, Inc.
    6. Michael Magill & Martine Quinzii & Jean‐Charles Rochet, 2015. "A Theory of the Stakeholder Corporation," Econometrica, Econometric Society, vol. 83(5), pages 1685-1725, September.
    7. Hart, Oliver & Zingales, Luigi, 2017. "Companies Should Maximize Shareholder Welfare Not Market Value," Journal of Law, Finance, and Accounting, now publishers, vol. 2(2), pages 247-275, November.
    8. Dirk Schoenmaker & Willem Schramade, 2023. "Corporate Finance for Long-Term Value," Springer Texts in Business and Economics, Springer, number 978-3-031-35009-2, July.
    9. Vikas Mehrotra & Randall Morck, 2017. "Governance and Stakeholders," NBER Working Papers 23460, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate governance; Shareholder value; Shareholder welfare; Stakeholder value; Externalities; Value creation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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