Right on its 20-year schedule,[1] the old debate over the proper purpose of the corporation has recently been revivified in books, articles, and blog posts in as dire a tone as ever. The spectacular corporate failures on the part of firms like Enron, Lehman Brothers, and the quasi-governmental Fannie Mae, accompanied by equally spectacular government bailouts of failed firms, have fueled the recent uproar. A sense that someone has somehow wronged the rest of us characterizes the zeitgeist of the post-bailout era. It is textbook law that a corporation’s board of directors must act in good faith to maximize for its…
Responses
In “The Future of Shareholder Wealth Maximization,” George Mocsary undertakes two important tasks. The first is to establish that, notwithstanding claims to the contrary advanced by some corporate law scholars,[1] the shareholder wealth maximization norm is and remains a bedrock principle of corporate law. The second is to establish that, on broadly libertarian grounds, the…
Professor Marcoux’s thoughtful reply to my essay serves as an important reminder that a corporation may accurately be described as a nexus of contracts. Notwithstanding its significant descriptive power, it is a framework that tends to be criticized along with agency theory and the Shareholder Wealth Maximization norm with which it is closely associated.[1] Marcoux…
In “The Future of Shareholder Wealth Maximization,” Prof. George Mocsary examines two questions: Does corporate law require a corporation’s board of directors to act to maximize shareholder wealth in order to fulfill its fiduciary duties; and if yes (as Prof. Mocsary interprets the cases), should it continue to do so? In this Response, I argue…
Prof. Cynthia Williams raises some of the standard arguments against the shareholder wealth maximization norm. Most of her arguments are addressed in my original essay,[1] and restating what is written there would not add to the conversation. On other points, which can be boiled down to problems with short-termism in its myriad manifestations, we obviously…
