Essay by Kent Greenfield
Using the tragic events of September 11th as case study, this Essay critiques a prominent, recent article that suggests the ideology of shareholder primacy has become so dominant that the “end of history” is at hand for corporate law. The author suggests that a dedication to shareholder primacy helped create the context in which the events of September 11th could occur, by making the airlines less attentive to security concerns that did not affect the airline companies' stock prices. Shareholder primacy makes corporations more likely to externalize the costs of the firms' decisions onto constituencies other than shareholders, and such externalities are a reason to doubt the efficacy of the shareholder primacy norm for advancing social welfare. The author argues that the normative claims for shareholder primacy depend on unproven assertions that economic welfare is equivalent to social welfare, and that shareholder welfare is equivalent to economic welfare. Shareholder primacy may be better for shareholders, but it may not be better for workers, customers, communities, the economy as a whole, or even firms themselves.
About the Author
Kent Greenfield. Professor of Law, Boston College Law School. J.D., University of Chicago; A.B., Brown University.
Citation
76 Tul. L. Rev. 1409 (2002)