Robert J. Rhee is John H. and Marylou Dasburg Professor of Law at the University of Florida Levin College of Law. This post is based on his recent article, forthcoming in the Minnesota Law Review.
Shareholder primacy is a foundational concept. The principle of profit maximization goes to the most basic question: What is the purpose of the corporation and corporate law? Although normative debate has persisted over many generations of economic history and academic scholarship, we are in a shareholder-centric era as a factual matter. Yet, remarkably, the question of whether shareholder primacy is positive law remains unresolved even today.
Shareholder primacy is universally described in scholarship as a “norm” but seldom as “law.” Viewing the concept of law through the prism of fiduciary duty, managerial authority, and the business judgment rule, opponents reject the idea of law; some diminish shareholder primacy further as an “ideology” or “dogma” or “belief system.” On the other hand, proponents place undue and hackneyed reliance on a single 1919 case from Michigan, Dodge v. Ford. Essentially this is where the debate on a positive legal theory stands. It is unsatisfactory. The basic question—“what is the law?”—has not received sufficient empirical or theoretical analyses. In a forthcoming article in the Minnesota Law Review, I advance a positive legal theory. The article answers these basic questions: Is shareholder primacy law? If so, how does it work?
