What We Talk About When We Talk About Shareholder Wealth Maximization
Tennessee Journal of Business Law (2017)
9 Pages Posted: 1 Mar 2018 Last revised: 13 Mar 2018
Date Written: 2017
Professor Stefan Padfield’s The Role of Corporate Personality Theory in Opting Out of Shareholder Wealth Maximization proposes a novel approach to the ongoing shareholder wealth maximization debate. Specifically, Padfield posits that an exploration of corporate personality theory might provide some clarity on the ability of for-profit corporations to privately order around the shareholder wealth maximization norm. Ultimately, Padfield argues that certain corporate personality theories support private ordering around the shareholder wealth maximization norm while others do not. Because of the varying levels of support, Padfield argues that a participant in the shareholder wealth maximization debate would be wise to incorporate corporate personality theory into their arguments, as it provides ammunition for supporters of both sides of the argument.
I agree with Padfield’s thesis that an analysis of corporate personality theory can prove helpful for anyone engaging in a debate regarding the ability of for-profit corporations to privately opt out of any shareholder wealth maximization norm. However, I disagree with Padfield’s implication that such an investigation will provide any clarity on the debate. Thus, my criticism is not about Padfield’s thesis. Rather, I take issue with an assumption implied in his piece—that we have defined the metes and bounds of the shareholder wealth maximization norm in a manner sufficient to have a meaningful debate. This assumption is not peculiar to Padfield, as many scholars debate the existence of the norm without properly defining what the norm requires. Thus, my primary complaint concerning Padfield’s piece is that before we can properly weigh the value of corporate personality theory in debating the ability of for-profit corporations to privately opt out of the shareholder wealth maximization norm, we need to have a working definition of precisely what the norm requires.
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