Corporate Constituency Statutes and Employee Governance

McDonnell, Brett

doi:10.2139/ssrn.349642

Cited by 9 publications

(12 citation statements)

References 16 publications

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“…Moreover, most states have adopted ''non-shareholder constituency statutes'' that explicitly allow managers to consider the interests of non-shareholder constituencies when making decisions (McDonnell 2004;Orts 1992). Pennsylvania was the first to adopt such a statute in 1983, with states such as New York and Nevada having followed suit (Delaware, however, has not).…”

Section: The Spn As a Legal Normmentioning

confidence: 99%

Shareholder Primacy, Corporate Social Responsibility, and the Role of Business Schools

2014

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This paper examines the shareholder primacy norm (SPN) as a widely acknowledged impediment to corporate social responsibility and explores the role of business schools in promoting the SPN but also potentially as an avenue for change by addressing misconceptions about shareholder primacy and the purpose of business. We start by explaining the SPN and then review its status under US and UK laws and show that it is not a likely legal requirement, at least under the guise of shareholder value maximization. This is in contrast to the common assertion that managers are legally constrained from addressing CSR issues if doing so is inconsistent with the economic interests of shareholders. Nonetheless, while the SPN might be muted as a legal norm, we show that it is certainly evident as a social norm among managers and in business schools-reflective, in part, of the sole voting rights of shareholders on corporate boards and of the dominance of shareholder theory-and justifiably so in the view of many managers and business academics. We argue that this view is misguided, not least when associated with claims of a purported legally enforceable requirement to maximize shareholder value. We propose two ways by which the influence of the SPN among managers might be attenuated: extending fiduciary duties of executives to non-shareholder stakeholders and changes in business school teaching such that it covers a plurality of conceptions of the purpose of the corporation.

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Section: The Spn As a Legal Normmentioning

confidence: 99%

Shareholder Primacy, Corporate Social Responsibility, and the Role of Business Schools

2014

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“…Most constituency statutes, however, provide that board directors may consider the long-term as well as the short-term interest of the corporation. 17 Table 1 summarizes inclusion of the statutory provisions across the states.…”

Section: Constituency Statutesmentioning

confidence: 99%

The Benefit Corporation: Corporate Governance and the For‐profit Social Entrepreneur

Hemphill

Cullari

2014

Business and Society Review

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The adoption by 19 states and the District of Columbia of a new variant of the business corporation form-known as the benefit corporation-presents several issues for legislatures, for entrepreneurs electing to organize as benefit corporations, for existing corporations that are converting to the new form, and for the stakeholders (other than shareholders) who are intended to be considered in benefit corporation governance. The article presents the history and structure of the new business form and a discussion of what has become its predecessor-the constituency statute. The model benefit corporation statute provisions are reviewed, which many states have adopted in toto.

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“…A board's attitude toward various stakeholders is likely to become an important determinant of its stakeholder policy. In addition, many state statutes have challenged the traditional view of the shareholder-only fiduciary duty of the board and specified that boards have the right to take the interests of all stakeholders into account (McDonnell, 2004). Under this pressure, boards may be more likely to apply "enlightened SM" in dealing with stakeholders while maximizing shareholder wealth.…”

Section: Board Monitoring and Agency Costsmentioning

confidence: 99%

Deviations from Expected Stakeholder Management, Firm Value, and Corporate Governance

Benson

Davidson

Wang

et al. 2011

Financial Management

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We propose that high‐quality corporate governance may mitigate agency costs related to value‐destroying investments in stakeholder management (SM). Using an unbalanced panel of 9,051 firm‐year observations for 1,631 firms, we find that deviations from expected stakeholder management (ESM) are increasing in chief executive officer (CEO) portfolio delta. We find, however, that deviations from ESM are negatively related to proxies for effective board monitoring. We also document that the effect of governance mechanisms varies by industry (consumer or industrial orientation) and SM dimension. The results indicate that corporations with good governance pursue shareholder value maximization while constraining unnecessary investment in stakeholders.

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Corporate Constituency Statutes and Employee Governance

Cited by 9 publications

References 16 publications

Shareholder Primacy, Corporate Social Responsibility, and the Role of Business Schools

Shareholder Primacy, Corporate Social Responsibility, and the Role of Business Schools

The Benefit Corporation: Corporate Governance and the For‐profit Social Entrepreneur

Deviations from Expected Stakeholder Management, Firm Value, and Corporate Governance

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