In the paper, The Pension System and the Rise of Shareholder Primacy, which was recently made publicly available on SSRN, I explore the influence of the pension system on corporate governance, particularly shareholder primacy and the relationship between corporations and their employees. Today it is widely accepted among business managers, scholars of corporate law and financial economists that the objective of corporate law and corporate governance should be to promote shareholders wealth (as opposed to a wider community of interests, including employees, creditors, suppliers, customers and local communities). Shareholder capitalism is, however, a relatively recent development. Large, publicly-traded corporations in the middle of the 20th century were characterized by managerial capitalism: managers had taken over the role of entrepreneurs within the firm, and compared to their predecessors they were hardly accountable to owners. Economists sometimes saw this as an advance over previous periods characterized by dominant founders, given that the system seemed more rational and stable. Around 1980, managerial capitalism began to give way to investor capitalism. Hostile takeovers, and later equity-based executive compensation, began to emerge as the new forces creating incentives for managers to focus on share value.

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