The Corporate Objective
Show Less

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.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 2: Shareholder Primacy

Andrew Keay


1. INTRODUCTION As explained in the first Chapter, there are two major theories that have been proposed for dealing with the issue of the ultimate corporate objective. This Chapter seeks to articulate and analyse one of those, namely the shareholder primacy theory.1 This theory is also known as ‘shareholder value’2 or ‘shareholder wealth maximisation’.3 It is a theory that is regarded as prevailing in Anglo-American law, and in other common law jurisdictions such as Australia, New Zealand and Canada. It has been said that the US and UK are liberal market economies that have features, such as a dispersed share ownership, more susceptibility to hostile takeovers and the existence of large institutional investors which are eager for quarterly improvements in the share price, and this tends to entrench shareholder primacy.4 The Chapter cannot possibly deal comprehensively with the shareholder primacy theory. Neither can it seek to interact with all of the literature that has been written on the subject. It is voluminous and has been written from the perspective of a number of different disciplines. The Chapter seeks to 1 Scholars clearly see the approach as the company’s purpose. For example, see L. Mitchell, ‘Groundwork of the Metaphysics of Corporate Law’ (1993) 50 Washington and Lee Law Review 1477 at 1485; L. Fairfax, ‘The Rhetoric of Corporate Law: The Impact of Stakeholder Rhetoric on Corporate Norms’ (2005) 21 Journal of Corporation Law 675 at 676; G. Crespi, ‘Maximizing the Wealth of Fictional Shareholders: Which Fiction Should Directors Embrace?’ (2007)...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.