The Maximands of Corporate Governance: A Theory of Values and Cognitive Style

125 Pages Posted: 25 Nov 2003

See all articles by Amir N. Licht

Amir N. Licht

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003


This paper considers the raison d'etre of corporations as it is reflected in the maximands of corporate governance. The debate over stockholders' versus stakeholders' interests as such maximands has been raging for decades. Advances in economic theory have not only failed to resolve this debate but have established that the problem is graver than what many may have estimated. This paper turns this debate on its head: Instead of asking What or Whose interests should corporations maximize, the real question is Why is this debate taking place at all? Aiming to extend current economic analyses of the maximands issue, this paper puts forward a new theory about the factors that determine these maximands. Recent advances in psychological research point to value emphases at the individual and societal levels and to the need for cognitive closure as such factors. The theory proposes the notion of value complexity as an organizing element that may associate certain value emphases with cognitive style. Overall, this theory provides explanations for various sticky points in the stockholder-stakeholder debate in the United States and in international settings, identifies gaps in other theoretical accounts, and generates testable hypotheses for empirical research. Extant evidence supports this theory.

Keywords: corporate governance systems, stockholder-stakeholder debate, stakeholder theory, values, culture, cognitive style, cognitive closure, value complexity, behavioral law, economics

JEL Classification: K22, Z13

Suggested Citation

Licht, Amir N., The Maximands of Corporate Governance: A Theory of Values and Cognitive Style (November 2003). ECGI - Law Working Paper No. 16/2003, Available at SSRN: or

Amir N. Licht (Contact Author)

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law ( email )

8 University Street
Herzliya, 4610101
972-9-952-7332 (Phone)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
952-9-9513323 (Fax)

HOME PAGE: http:/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics