Reconciling Corporate Interests with Broader Social Interests - Pursuit of Corporate Interests Beyond Shareholder Primacy

William & Mary Business Law Review (forthcoming 2022)

63 Pages Posted: 15 Feb 2022 Last revised: 6 Sep 2022

See all articles by Yong-Shik Lee

Yong-Shik Lee

The Law and Development Institute; University of Nebraska College of Law

Date Written: February 2, 2022

Abstract

A seminal case in corporate law, Dodge v. Ford Motor Co., set the cardinal principle that corporations must serve the interests of shareholders rather than the interests of employees, customers, or the community. This principle, referred to as “shareholder primacy,” has been considered a tenet of the fiduciary duty owed by corporate directors. Scholars have disagreed on the current legal status of shareholder primacy. This Article examines the controversy in light of the current state legislation and case law. Regardless of its current legal status, shareholder primacy has influenced corporate behavior and encouraged short-term profit-seeking behavior with significant social ramifications. Corporations have been criticized for undermining the interests of employees, customers, and the community in the name of profit maximization. This Article argues that corporate interests and broader social interests, such as benefits to consumers and employees, are not mutually exclusive and can be reconciled by allowing corporate managers and majority share-holders to define corporate interests more broadly, beyond the narrow confines of shareholder primacy.

Keywords: Shareholder Primacy, Fiduciary Duty, Corporate Interests, Profit Maximization, Social Interests

JEL Classification: G30

Suggested Citation

Lee, Y.S., Reconciling Corporate Interests with Broader Social Interests - Pursuit of Corporate Interests Beyond Shareholder Primacy (February 2, 2022). William & Mary Business Law Review (forthcoming 2022), Available at SSRN: https://ssrn.com/abstract=4024349 or http://dx.doi.org/10.2139/ssrn.4024349

Y.S. Lee (Contact Author)

The Law and Development Institute ( email )

United States

HOME PAGE: http://www.lawanddevelopment.net

University of Nebraska College of Law ( email )

730 N. 14th Street
Lincoln, NE 68588
United States

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