The Corporate Objective
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The Corporate Objective

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.
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Chapter 1: Public Companies: Context, Theory and Objectives

Andrew Keay


The aim of this Chapter is simply to set the scene for the balance of the book. It seeks to consider general issues such as the power and nature of large public companies, their position in society, the objective of the book and why the focus of the book is important. 1. THE CONTEXT The business company is a ubiquitous part of today’s society. Such entities have great effects on our daily lives and have an influence over just about all that we do. The business company has been with us now in its present form, or close to it, for over 150 years. As the Honourable Justice Michael Kirby (a judge of the High Court of Australia at the time of speaking) said extra-judicially, and in relation to public companies: [T]he idea of an independent corporation, governed by directors and accountable to shareholders, was a brilliant one. It permitted people to raise capital from the public, to invest it without, in most cases, a danger of personal risk and to engage in entrepreneurial activity which, otherwise, would probably not occur.1 Michael Jensen has emitted similar sentiments and said that the public company lowered the risk of capital and permitted the spread of financial risk over the portfolios of large numbers of investors.2 Nevertheless, the nature and operation of such companies has caused no end of discussion, argument and litigation, and the most fundamental issues relating to the company still elude us.3 This is undoubtedly partly due to their...

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