The Corporate Objective

The Corporate Objective

Corporations, Globalisation and the Law series

Andrew Keay

The Corporate Objective addresses a question that has been subject to much debate: what should be the objective of public corporations? It examines the two dominant theories that address this issue, the shareholder primacy and stakeholder theories, and finds that both have serious shortcomings.

Chapter 6: Investors

Andrew Keay

Subjects: law - academic, company and insolvency law, corporate law and governance


1. INTRODUCTION It is well-recognised that a company cannot be successful without the involvement in, and contribution by, various stakeholders,1 known in this work as investors,2 in company life.3 EMS certainly acknowledges that entity wealth maximisation is something that can only be achieved with a contribution from an array of investors, but, as was said in Chapter 4, the company is not a sum of all the interests of the investors. It could only be so if one were to allocate the investors a fixed priority in relation to one another4 and that cannot be done, for it is not possible to affix any specific proportion of the result of the company’s trading to any particular investor’s contribution.5 Management must remember that a large portion of its role is to coordinate the resources that are invested in their company by investors in order to produce goods or services and ultimately to make a profit. It is contended that ordinary decency requires companies to be obliged not to permit investors to harbour unreasonable expectations from their dealing with the company.6 But OECD, Annotations of the Principles of Corporate Governance (Clause IV), 2004. Accessible at (last visited, 1 February 2010). 2 Douglas Baird and Todd Henderson in ‘Other People’s Money’ (2008) 60 Stanford Law Review 1309 at 1311 acknowledge the groups discussed in this Chapter as ‘investors.’ To do otherwise is, according to these commentators, misleading. 3 This is acknowledged by General Motors. See

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