Corporate Governance as Privately-Ordered Public Policy: A Proposal

27 Pages Posted: 27 Sep 2017 Last revised: 19 Dec 2017

Lynn A. Stout

Cornell Law School - Jack G. Clarke Business Law Institute

Sergio Gramitto Ricci

Cornell Law School

Date Written: September 25, 2017

Abstract

In this Article, we show how our society can use corporate governance shifts to address, if not entirely resolve, a number of currently pressing social and economic problems. These problems include: rising income inequality; demographic disparities in wealth and equity ownership; increasing poverty and income insecurity; a need for greater innovation and investment in solving problems like disease and climate change; the “externalization” of many costs of corporate activity onto third parties such as customers, employees, creditors, and the broader society; the corrosive influence of corporate money in politics; and discontent and loss of trust in the capitalist system among a large and growing segment of the population.

We demonstrate how, to a very significant extent, these problems can be traced to the way shares in business corporations are currently owned, traded, and voted. We also offer a plausible plan for shifting the structure of share ownership, trading, and voting to create a more democratic and sustainable capitalism that allows business corporations to better serve humanity. Our proposal, which envisions developing a new form of institutional shareholder, does not rely either on market forces or government interventions. Rather, it relies on voluntary cooperation and the private ordering of free individuals using modern information technologies. It operates to reduce inequalities not only in wealth and income but also in influence over business corporations.

Keywords: Equality, Shareholders, Innovation, Proxy, Proxy Services, Corporate Governance, Universal Basic Income, Pensions, Private Ordering, Prosocial Behabior, Redistribution, Altruism, Capitalism, Welfare, Externalities, Corruption, Inequality, Poverty

Suggested Citation

Stout, Lynn A. and Gramitto Ricci, Sergio, Corporate Governance as Privately-Ordered Public Policy: A Proposal (September 25, 2017). Cornell Legal Studies Research Paper No. 17-42. Available at SSRN: https://ssrn.com/abstract=3042761 or http://dx.doi.org/10.2139/ssrn.3042761

Lynn A. Stout (Contact Author)

Cornell Law School - Jack G. Clarke Business Law Institute ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States
607-255-8431 (Phone)

Sergio Gramitto Ricci

Cornell Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

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