The New Corporate Governance
University of Chicago Business Law Review, Summer 2022, Vol.1, Issue 1
22 Pages Posted: 27 Apr 2022
Date Written: April 25, 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.
JEL Classification: G3,K22,L21
Suggested Citation: Suggested Citation