A Team Production Proposal to the Shareholder - Stakeholder Quarrel: The OECD Principles of Corporate Governance

Abstract

Among international agencies striving to establish global corporate governance norms, the Anglo-American Shareholder Value Model has become paradigmatic. Ironically, its ascendancy occurred as its principle academic progenitors, financial agency theorists, conceded the shareholder maxim misleading. Now, Financial Agency theorists speak of enlightened stakeholder theory and instruct directors to maximize the firm's long-term value. This theory's persistence owes much to the Organization for Economic Cooperation and Development (OECD)'s Principles of Corporate Governance. The Principles uneasily incorporates the two contending corporate models, shareholder value maximization and stakeholder theory. Unfortunately, this shareholder - stakeholder counterpoint has lost its relevance. Accordingly good governance principles must rest on a microeconomic theory in which the firm operates as a voluntary association that, by safeguarding firm specific investments, encourages capital (especially, human capital) investments. The team production theory of the firm, found in behavioral law and economics, provides such a model.

Keywords: corporate governance, OECD, shareholders, stakeholders

JEL Classification: G34, L21