Corporate Governance after the Financial Crisis
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Corporate Governance after the Financial Crisis

Edited by P. M. Vasudev and Susan Watson

The financial crisis of 2008–09 raises questions about the assumptions that underpin corporate governance. Shareholder value and private ordering may not in fact be the best means of promoting efficiency and corporate responsibility and the mechanisms used to ensure management accountability may not be effective. In this fascinating study, experts from around the world draw on the experience of the financial crisis to explore topical issues ranging from shareholder primacy and the corporate objective to the stakeholder principle, business ethics, and globalization of corporate governance principles. The chapters are provocative, acknowledging that our understanding of fundamental questions of corporate governance is still developing and demonstrating that the corporate governance debate is far from over.
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Chapter 4: Enlightened Shareholder Value, Social Responsibility and the Redefinition of Corporate Purpose Without Law

David Millon


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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