Document Type

Article

Publication Date

Summer 2014

Abstract

This article seeks to frame a short statement of purpose for corporate law on which all reasonable observers can agree. The statement, in order to succeed at its intended purpose, must satisfy two strict conditions: first, it must have enough content to be meaningful; second, it must be completely uncontroversial, both descriptively and normatively. The exercise, thus described, involves avoiding the issues that occupy center stage in discussions about corporate law while at the same time highlighting the discussants’ generally held presuppositions. Three closely interconnected issues arise. First, whether the statement of the purpose of corporate law should speak in terms of maximization and economic efficiency rather than settle for the less demanding notion of wealth enhancement. Second, whether the statement of purpose should be tied to the shareholder interest, or, to restate the issue in more familiar terms, whether the shareholder primacy principle should be incorporated into the statement of corporate law’s purpose. Third, whether the utility to be maximized should (or may) be framed as social welfare. The statement derived speaks in terms of “attempts” to maximize and avoids reference either to the shareholder interest, which is controversial, or to social welfare, which is substantively inappropriate. For meaningful content, the statement references the inherited doctrinal context of corporate law rather than economic theory.

Keywords

Corporate Governance, Corporation Law, corporate legal theory, utility maximization, shareholder value, welfare consequentialism, efficiency, competition

Publication Title

Journal of Corporation Law

Publication Citation

39 J. Corp. L. 713 (2014)

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