The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
amazon.com
The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
The corporation is its own residual claimant, and it is the board of directors that decides what to do with the corporation’s residual.
Lynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
What, then, do shareholders own? The labels “shareholder” and “stockholder” give the answer. Shareholders own shares of stock. A share of stock, in turn, is simply a contract between the shareholder and the corporation, a contract that gives the shareholder very limited rights under limited circumstances. (Owning shares in Apple doesn’t entitle you
... See moreLynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
Corporate law generally can be found in three places: (1) “internal” law (the requirements of a particular corporation’s charter and by-laws); (2) state codes and statutes; and (3) state case law. (Federal securities laws require public corporations to disclose information to investors, but the feds mostly take a “hands-off” approach to internal co
... See moreLynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
Consider first shareholders’ voting rights. As a matter of law these are severely limited in scope, primarily to the right to elect and remove directors.
Lynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
Thomas Kuhn’s classic book The Structure of Scientific Revolutions,
Lynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
If a company’s founders wanted to, they could easily put a provision in the articles stating (to parrot Dodge v. Ford) that the company’s purpose is “the profit of the stockholders.” Such provisions are as rare as unicorns. The overwhelming majority of corporate charters simply state that the corporation’s purpose is to do anything “lawful.”
Lynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
Long-term shareholders fear corporate myopia. Short-term shareholders embrace it—and many powerful shareholders today are short-term shareholders.
Lynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
First, U.S. corporate law does not, and never has, required directors of public corporations to maximize shareholder value. Second, closer inspection of the economic structure of public corporations reveals that shareholders are neither owners, nor principals, nor residual claimants. Third, the empirical evidence does not provide clear support for
... See moreLynn Stout • The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public
In brief, the business judgment rule holds that, so long as a board of directors is not tainted by personal conflicts of interest and makes a reasonable effort to become informed, courts will not second-guess the board’s decisions about what is best for the company—even when those decisions seem to harm shareholder value.