Shareholder Primacy in Benefit Corporations
Fiduciary Obligations in Business (New York: Cambridge University Press 2020) (2020, Forthcoming)
24 Pages Posted: 20 Dec 2019
Date Written: December 19, 2019
The goal of the business corporation traditionally has been understood to be the maximization of shareholder wealth. A growing demand for social enterprise has led to the creation of various new forms of business organization, including the benefit corporation, that have the goal of creating both shareholder wealth and other public benefits. Although benefit corporations were developed to overcome the shareholder wealth maximization norm, it is not fair to say that they also overcome shareholder primacy. Properly understood, benefit corporations are shareholder-centric: they exist to allow shareholders to pursue altruistic goals rather than to require them to do so. This essay demonstrates this from the history and structure of the Model Benefit Corporation Act and argues that benefit corporation legislation ought to remain essentially enabling rather than mandatory in nature.
Keywords: benefit corporation, corporate governance, corporate law, corporate purpose, fiduciary duty, public benefit, shareholder primacy, wealth maximization
JEL Classification: K20, K22
Suggested Citation: Suggested Citation