Chapter 4: Enlightened Shareholder Value, Social Responsibility and the Redefinition of Corporate Purpose Without Law
David Millon INTRODUCTION Enlightened shareholder value (ESV) is the idea that corporations should pursue shareholder wealth with a long-run orientation that seeks sustainable growth and profits based on responsible attention to the full range of relevant stakeholder interests. This approach to management contrasts with a short-term focus on current share price even when that objective entails immediate or longer-term negative effects on non-shareholders. Enlightened shareholder value still recognizes the priority of shareholder interests and therefore differs from a pluralist management model based on balancing all stakeholder interests. Nevertheless, because ESV recognizes that long-term business success depends on having regard for the interests of all who contribute to and are affected by corporate activity, it represents an alternative to a narrow conception of shareholder primacy. The combination of a long-range, sustainable conception of value coupled with acknowledgement of the importance of stakeholder considerations for achievement of that goal thus resonates with notions of corporate social responsibility (CSR). This chapter considers the prospects for acceptance of an ESV approach to management by US transnational corporations. It begins by explaining management practice, looking first for legal determinants and then at the non-legal causes that actually shape current behavior. US corporate law provides ample space for express recognition of non-shareholder interests and a long-run approach to management. The law does not mandate short-term shareholder primacy. Neither, however, does it require commitment to social responsibility. US law, in other words, is surprisingly agnostic on the important question of management’s primary duty. And, 68 M2860 -...
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