Document Type


Publication Date



This paper is the second in a series considering the argument that corporate laws that give only rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. This piece was written as part of a symposium honoring the outstanding work of Professors Lyman Johnson and David Millon, and it seeks to encourage Professors Johnson and Millon, as proponents of the view that corporations have no duty to make stockholder welfare the end of corporate law, to focus on the reality that corporate power translates into corporate purpose.

Drawing on examples of controlled companies that pursue goals other than shareholder wealth maximization, which Professors Johnson and Millon, among others, often reference to support the proposition that there is no duty under corporate law to put stockholders first, this paper makes the point that those with power, controlling stockholders in this case, dictate corporate purpose. In widely-held public companies, the power dynamics are identical, and in these companies too, boards tend to maximize the preferences of those with power, the equity holders. This paper also points to the phenomenon of corporate inversions to highlight the fact that corporate boards are so responsive to shareholder interests that they will in fact undermine the tax base of the corporation’s home and chartering nation by redomiciling, solely to benefit the corporation’s equity holders. It is these equity holders who are the only “citizens” of the corporate republic and they have no ties of national allegiance or any shared interest other than in the return on their invested equity. If in reality corporate boards could consider other corporate constituencies as equal—such as the corporation’s workers or communities—why would so many corporations choose to redomicile to lower their tax bills, and in the process, divert funds away from the human beings who would ultimately benefit from their tax dollars, especially in states that permit boards to consider non-shareholder constituencies? It is not likely because these boards are comprised of unusually callous managers and directors. Rather, it is more likely the reality that corporate power matters and dictates corporate purpose. If we want a world where stockholders are not the sole end of corporate governance, then we cannot have a system where they are the only constituency with any power.


Corporate law, corporations, fiduciary duties, corporate purpose, corporate governance, Hobby Lobby, institutional ownership and control, board of directors, corporate inversions, social responsibility, stakeholders, shareholders, corporate constituency statutes, Delaware General Corporation Law

Publication Title

Washington & Lee Law Review