The New Corporate Governance
University of Chicago Business Law Review, Forthcoming
29 Pages Posted: 20 Apr 2022 Last revised: 31 Aug 2022
Date Written: August 17, 2022
In the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. In some cases shareholders are pushing companies to take actions that may reduce market value. It is hard to understand this behavior using the dominant corporate governance paradigm based on shareholder value maximization. We explain how jurisprudence has sustained this criterion in spite of its economic weaknesses. To overcome these weaknesses we propose the criterion of shareholder welfare maximization and argue that it can better explain observed behavior. Finally, we outline how shareholder welfare maximization can be implemented in practice.
Keywords: Shareholder Value, Shareholder Welfare, Proxy Voting
JEL Classification: G3, L21, K22
Suggested Citation: Suggested Citation