From Dodge to eBay: The Elusive Corporate Purpose

Virginia Law & Business Review, Vol. 13, No. 2, pp. 155-211, Summer 2019

GWU Law School Public Law Research Paper No. 2019-68

GWU Legal Studies Research Paper No. 2019-68

58 Pages Posted: 2 Nov 2019 Last revised: 10 Nov 2019

See all articles by Dalia Tsuk Mitchell

Dalia Tsuk Mitchell

George Washington University Law School

Date Written: 2019

Abstract

This article examines the history of the law of corporate purpose. I argue that the seemingly conflicting visions of corporate social responsibility and shareholder wealth maximization, which characterize contemporary debates about the subject, are grounded in two different paradigms for corporate law — a socio-political paradigm and an economic-financial one. Advocates of the socio-political paradigm have historically focused on the power that corporations could exercise in society, while those embracing the economic-financial paradigm expressed concerns about the power that the control group could exercise over the corporation’s shareholders. Over the course of the twentieth century, scholars have debated the merits of each of these paradigms and the concerns associated with them, while judges drew upon the academic and, more importantly, the managerial sentiments and concerns of the era to attach a purpose to corporate law’s doctrine, that is, the ultra vires doctrine in the early twentieth century, the enabling business judgment rule by mid-century, and the laws applicable to evaluating managerial responses to hostile takeovers at the century’s end. Ultimately, the cases seemingly addressing corporate purpose did not endorse wealth maximization or social responsibility as objectives. Rather, they empowered corporate managers to set corporate goals without interference from shareholders or the courts.

Keywords: Legal History, Corporate Governance, Corporate Power, Managerialism, Corporate Purpose, Ultra Vires, Corporate Social Responsibility, Hostile Takeovers, Shareholder Wealth Maximization, eBay, Steinway, Dodge, Smith v. Barlow, Shlensky, Dodd, Berle, L

Suggested Citation

Tsuk Mitchell, Dalia, From Dodge to eBay: The Elusive Corporate Purpose (2019). Virginia Law & Business Review, Vol. 13, No. 2, pp. 155-211, Summer 2019; GWU Law School Public Law Research Paper No. 2019-68; GWU Legal Studies Research Paper No. 2019-68. Available at SSRN: https://ssrn.com/abstract=3473398

Dalia Tsuk Mitchell (Contact Author)

George Washington University Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
66
Abstract Views
220
rank
347,467
PlumX Metrics