Towards Accountable Capitalism: Remaking Corporate Law through Stakeholder Governance

Roosevelt Institute Issue Brief | October 2018

17 Pages Posted: 13 Jan 2019

See all articles by Lenore Palladino

Lenore Palladino

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics; Franklin & Eleanor Roosevelt Institute

Kristina Karlsson

Roosevelt Institute

Date Written: October 3, 2018

Abstract

Corporations today operate according to a model of corporate governance known as “shareholder primacy.” This theory claims that the purpose of a corporation is to generate returns for shareholders, and that decision-making should be focused on a singular goal: maximizing shareholder value. This single-minded focus — which often comes at the expense of investments in workers, innovation, and long-term growth — has contributed to today’s high-profit, low wage economy. With corporate rights should come societal responsibilities, but the rules of corporate America today do not guarantee that firms advance the public interest. It is time to change corporate governance law, reflected in a new framework, to ensure that the wealth created at the behest of public charters benefits the stakeholders who, collectively, generate prosperity. The changes to corporate governance that we recommend are intended to fundamentally rebalance power among stakeholders. Most notably, the rules that mandate the sole, shortsighted focus on stock price must be rewritten. Corporate decision-making must also consider every stakeholder who contributes to corporate success and ensure that all key stakeholders have a voice in governance of the firm.

JEL Classification: G3

Suggested Citation

Palladino, Lenore and Karlsson, Kristina, Towards Accountable Capitalism: Remaking Corporate Law through Stakeholder Governance (October 3, 2018). Roosevelt Institute Issue Brief | October 2018, Available at SSRN: https://ssrn.com/abstract=3309431

Lenore Palladino (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

Amherst, MA 01003
United States

Franklin & Eleanor Roosevelt Institute ( email )

4079 Albany Post Rd.
Hyde Park, NY 12538
United States

Kristina Karlsson

Roosevelt Institute

570 Lexington Ave.
5th Floor
New York, NY 10022
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
128
Abstract Views
508
rank
240,539
PlumX Metrics