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Corporate power is corporate purpose I: evidence from my hometown

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  • Leo E. Strine Jr

Abstract

This paper considers a rather tired argument in corporate governance circles, that corporate laws only giving rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. By continuing to suggest that corporate boards themselves are empowered to treat the best interests of other corporate constituencies as ends in themselves, no less important than stockholders, scholars and commentators obscure the need for legal protections for other constituencies. As a case study, this paper examines what happened when an activist investor came to DuPont, illustrating how its board knew that they were expected to make their end investors’ best interests, even if that hurt other constituencies. This isn’t a story about bad people, but a reminder to those genuinely concerned for non-shareholder constituencies to face reality and support changes in the power dynamics affecting corporate governance that make regard for non-shareholder constituencies an obligation for business.

Suggested Citation

  • Leo E. Strine Jr, 2017. "Corporate power is corporate purpose I: evidence from my hometown," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(2), pages 176-187.
    • Handle: RePEc:oup:oxford:v:33:y:2017:i:2:p:176-187.
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    File URL: http://hdl.handle.net/10.1093/oxrep/grx027
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    Citations

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    Cited by:

    1. Shapira, Roy & Zingales, Luigi, 2017. "Is Pollution Value-Maximizing? The DuPont Case," Working Papers 268, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    2. John Buchanan & Dominic H. Chai & Simon Deakin, 2018. "Unexpected Corporate Outcomes from Hedge Find Activism in Japan," Working Papers wp494, Centre for Business Research, University of Cambridge.
    3. Zingales, Luigi & Shapira, Roy, 2017. "Is Pollution Value-Maximizing? The DuPont Case," CEPR Discussion Papers 12323, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    short-termism; institutional investors; corporate law; corporations; fiduciary duties; Dodge v. Ford; corporate constituency statutes; corporate governance; social responsibility; CSR; stakeholders; activist investors; myopia; shareholders; boards; managers; DuPont; need for stakeholder protections;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • P12 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Enterprises

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