The Perpetual Corporation
Andrew A. Schwartz
University of Colorado Law School
May, 21 2012
George Washington Law Review, Vol. 80, p. 764, 2012
U of Colorado Law Legal Studies Research Paper No. 12-06
Courts and commentators take for granted that the ultimate objective of a business corporation is long-run profitability, not immediate profits. But a corporation is a creature of statute, so a statutory source for this rule must be found — or it is not really a rule. Yet prior literature has not identified any such legal basis, leaving a gap in corporate theory. This Article fills that gap by showing that the modern corporation is obliged to act with a long-term view because it has “perpetual existence” under the law. This Article then explains that because they must plan for a perpetual future, corporations should invest like immortal entities, namely with a long time horizon and low discount rate. This method of “immortal investing” offers a number of fundamental advantages to the corporation, and is also in the public interest, as immortal investors can be expected to highly value the future and act as stewards for natural resources and other assets.
Number of Pages in PDF File: 68
Keywords: Corporation, entity, immortal, perpetual, long-term, environment, discount rate, time horizon
JEL Classification: K2, K22, O16, O40, D20, D21, D90, D99Accepted Paper Series
Date posted: May 21, 2012
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