A Necessary Social Evil: The Indispensability of the Shareholder Value Corporation

Abstract

This symposium paper critically evaluates the developing 'Post-Shareholder-Value' ('PSV') paradigm in corporate governance scholarship and practice, with particular reference to Professor Colin Mayer's influential theory of the corporation as a unique long-term "commitment device". The paper's positive claim is that, while evolving PSV institutional mechanisms such as Benefit Corporations and dual-class share structures are generally encouraging from a social perspective, there is cause for scepticism about their capacity to become anything more than a niche or peripheral feature of the US public corporations landscape. This is because such measures, in spite of their apparent reformist potential, are still ultimately quasi-contractual and thus essentially voluntary in nature, meaning that they are unlikely to be adopted in a public corporations context except in extraordinary instances. The paper's normative claim, meanwhile, is that while in many respects the orthodox shareholder-oriented corporate governance framework may be a social evil; it is nonetheless a necessary evil, which US worker-savers implicitly tolerate as the effective social price for sustaining a system of non-occupational income provision outside of direct state control. Accordingly, pending fundamental reform of the broader social-institutional context to the shareholder-oriented corporation, the key features of the evolving PSV governance model should remain quasi-contractual as opposed to being placed on any sort of mandatory regulatory footing.

Keywords: corporate governance, theory of the firm, shareholder primacy, Benefit Corporations, dual-class voting structures, capital markets, social welfare, United States

JEL Classification: G3, G32, G39, K2, K22