The New Corporate Governance

University of Chicago Business Law Review, Summer 2022, Vol.1, Issue 1

University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2022-55

22 Pages Posted: 27 Apr 2022

See all articles by Oliver Hart

Oliver Hart

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: April 25, 2022

Abstract

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

Hart, Oliver D. and Zingales, Luigi, The New Corporate Governance (April 25, 2022). University of Chicago Business Law Review, Summer 2022, Vol.1, Issue 1, University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2022-55, Available at SSRN: https://ssrn.com/abstract=4094175 or http://dx.doi.org/10.2139/ssrn.4094175

Oliver D. Hart

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-496-3461 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Luigi Zingales (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3196 (Phone)
773-834-2081 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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