Print
E-MailTami Groswald Ozery is a co-Editor of the Forum and a Fellow at the Harvard Law School Program on Corporate Governance. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Toward Fair and Sustainable Capitalism by Leo E. Strine, Jr (discussed on the Forum here).
This Thursday, June 25, 2020, the Saïd Business School at the University of Oxford will hold a debate titled Stakeholder versus Shareholder Capitalism: the Great Debate. The debate will be held between Harvard Law School Professor Lucian Bebchuk and Oxford University Professor Colin Mayer.
In the tradition of Oxford debates, the audience watching it will be asked to vote on the question being debated: Whether corporate leaders should serve the interests of all stakeholders or just shareholders. The event will be publicly broadcast live at 9am EST, and information about how to watch the debate is available on the Oxford University website here.
Lucian Bebchuk is the James Barr Ames Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School. His recent article with Roberto Tallarita, The Illusory Promise of Stakeholder Governance, challenges the “stakeholderism” view under which corporate leaders should give independent weight to the interests of all stakeholders. The article conducts a conceptual, economic, and empirical analysis of stakeholderism and its expected consequences. It conclude that stakeholderism should be rejected, including by those who care deeply about the welfare of stakeholders.
Colin Mayer, CBE, is the Peter Moores Professor of Management Studies at, and former Dean of, the Saïd Business School of the University of Oxford. His recent book, Prosperity: Better Business Makes the Greater Good, puts forward a case for stakeholder capitalism. And his recent ECGI Discussion Paper, Shareholderism versus Stakeholderism – A Misconceived Contradiction: A Comment on “The Illusory Promise of Stakeholder Governance” by Lucian Bebchuk and Roberto Tallarita, takes issue with and responds to the Bebchuk-Tallarita challenge to stakeholder capitalism.
2 Comments
Part of the issue is a true lack of thought diversity. As we noted in 2003, “We have observed several cases where corporate management unfairly transferred value from outsider to insider shareholders. These abuses have been linked to the abandonment of ethical principles noted earlier. Faulty market practices mask a company’s true value and misallocate capital by moving investment dollars from deserving companies to unworthy companies.” See: https://www.sec.gov/comments/4-526/4526-1.pdf
While I support Lucian Bebchuk’s arguments in the shareholder vs stakeholder model debate, there remains an unaddressed issue. The assumption continues to be made that the there has been a shareholder value maximization model in place at public companies. While there may be some exceptions (think the Darden Restaurants board after Starboard Value replaced all directors in 2014) by and large that is not correct in my view. The current model is one of compliance, risk avoidance, an obsession on quarterly earnings and director selection not focused on competence (with competence defined as directly relating to the value creation requirements of the company). This is not a model designed to develop the full potential of the company being governed thus is not a shareholder value maximization model.