Has Corporate Law Failed? Addressing Proposals for Reform
20 Pages Posted: 14 Jul 2009
Date Written: April 21, 2009
Successful corporations create extraordinary wealth. The longstanding question is how this wealth should be distributed. The conventional answer has been shareholder primacy. Most stakeholders, such as customers, suppliers, creditors, and employees, must negotiate their portion ex ante, but everything left over, the residual interest, belongs to the corporation’s shareholders. The progressive answer is that wealth should be distributed fairly to all stakeholders, and that corporations have a social responsibility that goes beyond the mere maximization of shareholder wealth. This essay reviews Kent Greenfield's book, The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities, that develops and extends the arguments for a broader stakeholder approach.
Keywords: corporate governance, progressive corporate law, corporate social responsibility
JEL Classification: K22
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