Monthly Archives: September 2018

With the (1) embrace of corporate purpose, ESG, and long-term investment strategy by BlackRock, State Street and Vanguard, (2) adoption and promotion by the World Economic Forum of The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, (3) enactment of a benefit corporation law by Delaware and some thirty states, (4) introduction of legislation by Senator Warren to achieve stakeholder corporate governance by way of mandatory federal incorporation, and (5) formation of Focusing Capital on the Long Term, Coalition for Inclusive Capitalism and Investors Stewardship Group, it is clear that we are at a new inflexion point in the development of corporate governance. We are ready to abandon Milton Friedman’s 1970 dictum that the sole purpose of the corporation is to maximize profits for the shareholders—a dictum that ruled thinking in business schools, law schools, on Wall Street, and in boardrooms until proven invalid by the 2008 fiscal crisis and recent studies discrediting so-called empirical “evidence” used to justify attacks by activist hedge funds designed to force companies to engage in financial engineering to create short-term profits. We can achieve the objectives of The New Paradigm and the objectives of corporate managers who want to be able to operate free of Wall Street’s focus on short-termism and free of attacks, and threats of attacks, by activist hedge funds. And we can do it without mandatory federal incorporation infringing on state corporation law or state corporate governance jurisprudence. It can, and should, be done by states, and especially Delaware, by doing the following:

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