The Failure of Corporate Law

Business Ethics and the ‘End of History’ in Corporate Law

“…Something along these lines has been proposed by stakeholder theorists, such as R. Edward Freeman, who argue that an ''agent'' within the firm (such as a manager, or director), ''should serve the interests of all stakeholders'' (1994, p. 417). Similar arguments have been made by Greenfield (2006). The claim is that ownership, in Hansmann's sense of the term, should be jointly exercised by everyone involved in the firm.…”

“…Greenfield 2006). And yet their proposals for reform almost invariably slip into the deep, well-worn rut of multifiduciary stakeholder theory.…”

“…While shareholder primacy may be the default view in corporate law, business ethicists have resolutely resisted this doctrine, arguing against the idea that shareholders should have any sort of privileged position within the firm. The most mainstream expression of this can be found in multifiduciary stakeholder theory (Goodpaster 1991, p. 60), which argues that members of the board of directors of a firm should act as agents for a variety of different ''stakeholder'' groups-not just shareholdersand that corporate law should be adjusted, where necessary, in order to accommodate or even enforce these obligations (Greenfield 2006). Hansmann's argument is particularly devastating to this doctrine, because of the emphasis that he puts on homogeneity of interest as the central characteristic that makes a group suitable for assuming ownership.…”

A substantive conception of work and of the firm – institutional implications

“…Note that most of these suggestions -the end of shareholder dominance, employees' representation in boardrooms, and managers' accountability to employees -are advocated since long by progressive law scholars (Bodie 2017;Greenfield 1998) and are now discussed in many countries who engaged in a revision of the corporate statute of firms (e.g, France, the UK, Italy). Of course, codetermination does not make the conflicts of interests disappear.…”

“…But the "shareholder primacy" governance model is increasingly criticized for focusing on financial transactions and leaving corporate law disconnected from the strategic and operating management of the firm (Bodie 2017;Greenfield 1998), being thus denounced for hindering innovation and the long-term sustainability of many firms (Marsden, 2016). According to empirical evidence, the legitimacy of authority is crucial for its effectiveness and is grounded on both substantive and procedural considerations.…”