{"id":3231,"date":"2022-02-08T00:23:05","date_gmt":"2022-02-08T00:23:05","guid":{"rendered":"https:\/\/live-cornell-law-review.pantheonsite.io\/?p=3231"},"modified":"2022-02-08T00:23:05","modified_gmt":"2022-02-08T00:23:05","slug":"the-inevitability-and-desirability-of-the-corporate-discretion-to-advance-stakeholder-interests","status":"publish","type":"post","link":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/2022\/02\/08\/the-inevitability-and-desirability-of-the-corporate-discretion-to-advance-stakeholder-interests\/","title":{"rendered":"The Inevitability and Desirability of the Corporate Discretion to Advance Stakeholder Interests"},"content":{"rendered":"\n<p>In <em>The Illusory Promise of Stakeholder Governance<\/em>, Lucian Bebchuk and Roberto Tallarita offer a vigorous defense of the view that corporate leaders should have a legal duty to maximize only shareholder value.<sup class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_1');\" onkeypress=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_1');\" ><sup id=\"footnote_plugin_tooltip_3231_1_1\" class=\"footnote_plugin_tooltip_text\">1<\/sup><\/a><cite class=\"footnote_tooltip\"><span class=\"footnote-inner\">1. Lucian A. Bebchuk &amp; Roberto Tallarita, The Illusory Promise of Stakeholder Governance, 106 CORNELL L. REV. 91 (2020). They define \u201ccorporate leaders\u201d as \u201cthose individuals, both directors&nbsp;&#x2026; <span class=\"footnote_tooltip_continue\"  onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_1');\">Continue reading<\/span><\/span><\/cite><\/sup><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_3231_1_1').tooltip({ tip: '#footnote_plugin_tooltip_text_3231_1_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script> They define \u201cstakeholders\u201d as \u201call non-shareholder constituencies of the corporation\u2014including employees, customers, suppliers, communities, and the environment.\u201d<sup class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_2');\" onkeypress=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_2');\" ><sup id=\"footnote_plugin_tooltip_3231_1_2\" class=\"footnote_plugin_tooltip_text\">2<\/sup><\/a><cite class=\"footnote_tooltip\"><span class=\"footnote-inner\">2. Id. at 93.<\/span><\/cite><\/sup><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_3231_1_2').tooltip({ tip: '#footnote_plugin_tooltip_text_3231_1_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script> They criticize the alternative of \u201cstakeholderism\u201d, which they define as \u201ca governance model that encourages and relies on corporate leaders to serve the interests of stakeholders and not only those of shareholders.\u201d<sup class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_3');\" onkeypress=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_3');\" ><sup id=\"footnote_plugin_tooltip_3231_1_3\" class=\"footnote_plugin_tooltip_text\">3<\/sup><\/a><cite class=\"footnote_tooltip\"><span class=\"footnote-inner\">3. Id. at 91 (emphasis added). See also id. at 94 (similar language).<\/span><\/cite><\/sup><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_3231_1_3').tooltip({ tip: '#footnote_plugin_tooltip_text_3231_1_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script> Although they sometimes call their position \u201cshareholder primacy\u201d, that term is a misnomer because they favor more than a legal duty to primarily advance shareholder interests.<sup class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_4');\" onkeypress=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_4');\" ><sup id=\"footnote_plugin_tooltip_3231_1_4\" class=\"footnote_plugin_tooltip_text\">4<\/sup><\/a><cite class=\"footnote_tooltip\"><span class=\"footnote-inner\">4. Id. at 104, 106, 110, 139.<\/span><\/cite><\/sup><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_3231_1_4').tooltip({ tip: '#footnote_plugin_tooltip_text_3231_1_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script> They favor what I will call \u201cshareholder exclusivity\u201d, a legal duty to exclusively maximize shareholder interests that forbids corporate leaders from putting any independent weight whatsoever on the interests of non-shareholders.<sup class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_5');\" onkeypress=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_5');\" ><sup id=\"footnote_plugin_tooltip_3231_1_5\" class=\"footnote_plugin_tooltip_text\">5<\/sup><\/a><cite class=\"footnote_tooltip\"><span class=\"footnote-inner\">5. See id. at 91, 94, 97\u201398, 110, 114\u201315, 139 (arguing that the corporate law should allow corporate leaders to consider stakeholder interests only to the extent that doing so would maximize&nbsp;&#x2026; <span class=\"footnote_tooltip_continue\"  onclick=\"footnote_moveToReference_3231_1('footnote_plugin_reference_3231_1_5');\">Continue reading<\/span><\/span><\/cite><\/sup><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_3231_1_5').tooltip({ tip: '#footnote_plugin_tooltip_text_3231_1_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script><\/p>\n\n\n\n<p>To understand why, we first need a more detailed explanation of the analysis I offered for my conclusions, which I provide in Part I. I then explain in Part II why none of the arguments in Bebchuk and Tallarita\u2019s article is responsive to my analysis.<\/p>\n\n\n\n<p>To read this Essay, please click here: <a href=\"https:\/\/live-cornell-law-review.pantheonsite.io\/wp-content\/uploads\/2022\/02\/Elhauge-essay-final-1-1.pdf\"><em>The Inevitability and Desirability of the Corporate Discretion to Advance Stakeholder Interests<\/em>.<\/a><\/p>\n<div class=\"speaker-mute footnotes_reference_container\"> <div class=\"footnote_container_prepare\"><p><span role=\"button\" tabindex=\"0\" class=\"footnote_reference_container_label pointer\" onclick=\"footnote_expand_collapse_reference_container_3231_1();\">References<\/span><span role=\"button\" tabindex=\"0\" class=\"footnote_reference_container_collapse_button\" style=\"display: none;\" onclick=\"footnote_expand_collapse_reference_container_3231_1();\">[<a id=\"footnote_reference_container_collapse_button_3231_1\">+<\/a>]<\/span><\/p><\/div> <div id=\"footnote_references_container_3231_1\" style=\"\"><table class=\"footnotes_table footnote-reference-container\"><caption class=\"accessibility\">References<\/caption> <tbody> \r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_3231_1('footnote_plugin_tooltip_3231_1_1');\"><a id=\"footnote_plugin_reference_3231_1_1\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>1<\/a><\/th> <td class=\"footnote_plugin_text\">Lucian A. Bebchuk &amp; Roberto Tallarita, The Illusory Promise of Stakeholder Governance, 106 CORNELL L. REV. 91 (2020). They define \u201ccorporate leaders\u201d as \u201cthose individuals, both directors and top executives, who make important corporate decisions.\u201d Id. at 94.<\/td><\/tr>\r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_3231_1('footnote_plugin_tooltip_3231_1_2');\"><a id=\"footnote_plugin_reference_3231_1_2\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>2<\/a><\/th> <td class=\"footnote_plugin_text\">Id. at 93.<\/td><\/tr>\r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_3231_1('footnote_plugin_tooltip_3231_1_3');\"><a id=\"footnote_plugin_reference_3231_1_3\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>3<\/a><\/th> <td class=\"footnote_plugin_text\">Id. at 91 (emphasis added). See also id. at 94 (similar language).<\/td><\/tr>\r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_3231_1('footnote_plugin_tooltip_3231_1_4');\"><a id=\"footnote_plugin_reference_3231_1_4\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>4<\/a><\/th> <td class=\"footnote_plugin_text\">Id. at 104, 106, 110, 139.<\/td><\/tr>\r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_3231_1('footnote_plugin_tooltip_3231_1_5');\"><a id=\"footnote_plugin_reference_3231_1_5\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>5<\/a><\/th> <td class=\"footnote_plugin_text\">See id. at 91, 94, 97\u201398, 110, 114\u201315, 139 (arguing that the corporate law should allow corporate leaders to consider stakeholder interests only to the extent that doing so would maximize shareholder value and should bar corporate leaders from putting any independent weight on stakeholder interests).<\/td><\/tr>\r\n\r\n <\/tbody> <\/table> <\/div><\/div><script type=\"text\/javascript\"> function footnote_expand_reference_container_3231_1() { jQuery('#footnote_references_container_3231_1').show(); jQuery('#footnote_reference_container_collapse_button_3231_1').text('\u2212'); } function footnote_collapse_reference_container_3231_1() { jQuery('#footnote_references_container_3231_1').hide(); jQuery('#footnote_reference_container_collapse_button_3231_1').text('+'); } function footnote_expand_collapse_reference_container_3231_1() { if (jQuery('#footnote_references_container_3231_1').is(':hidden')) { footnote_expand_reference_container_3231_1(); } else { footnote_collapse_reference_container_3231_1(); } } function footnote_moveToReference_3231_1(p_str_TargetID) { footnote_expand_reference_container_3231_1(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_3231_1(p_str_TargetID) { footnote_expand_reference_container_3231_1(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }<\/script>","protected":false},"excerpt":{"rendered":"<p>In The Illusory Promise of Stakeholder Governance, Lucian Bebchuk and Roberto Tallarita offer a vigorous defense of the view that corporate leaders should have a legal duty to maximize only shareholder value.11. Lucian A. Bebchuk &amp; Roberto Tallarita, The Illusory Promise of Stakeholder Governance, 106 CORNELL L. REV. 91 (2020). They define \u201ccorporate leaders\u201d as&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[26,101,52],"tags":[224,614],"class_list":["post-3231","post","type-post","status-publish","format-standard","hentry","category-essay","category-issue-7-print-volume-106","category-print-volume-106","tag-corporate-purpose","tag-stakeholder"],"acf":[],"_links":{"self":[{"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/posts\/3231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/comments?post=3231"}],"version-history":[{"count":0,"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/posts\/3231\/revisions"}],"wp:attachment":[{"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/media?parent=3231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/categories?post=3231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/lawreview\/wp-json\/wp\/v2\/tags?post=3231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}