Economic Policies for Innovative Enterprises: Implementing Multi-Stakeholder Corporate Governance

Abstract

Large corporations dominate economic and social life in the United States and around the globe. The mainstream corporate governance ideology of “shareholder primacy” claims that the exclusive purpose of a corporation is to generate returns for shareholders, which means that governance decisions should be exclusively in their hands. However, shareholder primacy lacks a theory of how companies innovate, and instead focuses solely on allocation of corporate profits, misunderstanding the relationship of shareholders to the twenty-first-century corporation. The theory of the corporation as an innovative enterprise—engaged in productive innovation by producing higher-quality goods and services for lower unit costs—is an accurate way to understand what makes corporations successful producers. Stakeholder theory from progressive legal scholarship illustrates specific corporate governance institutions that can assist innovation, including fiduciary duty, stakeholder participation in decision making, and equity ownership. This article contributes to the growing literature refuting shareholder primacy by utilizing the theories of the innovative enterprise and multi-stakeholder governance to propose reshaping US corporate governance to better to serve innovation in production and a balance of power in distributional decision making. JEL classification: B50, D21, G30, G35, K22

The Investigation about the Heritage over Generations for the Family Enterprise and Firms Financialization Process

“…However, unlike others, they have more emotional wealth, so they will consider other factors unrelated to finance in the future. In terms of literature, the survey shows that family businesses will become targets [6]. Therefore, this paper selects 488 family businesses facing intergenerational transmission from 2008 to 2018 as the research object, as well as the influencing factors between intergenerational enterprises [7].…”

The Contribution of Shareholder Primacy to the Racial Wealth Gap

“…Finally, corporations are businesses with public permission to operate in the form of a public charter, without which they cannot take advantage of the privileges of limited liability and perpetual existence. Because they are important social institutions, in a democratic society, the public permission to operate should come with public accountability to operate in the general public benefit (Palladino, 2019(Palladino, , 2021a. The distributional skew of corporate equity ownership is that, despite arguments that what is good for shareholders is most efficient for society, the benefits of shareholder primacy flow largely to the elite-and mainly white-shareholder class (Ireland, 2005).…”

“…Shareholder primacy is a policy choice: US policymakers can choose to reform corporate and securities laws to shift corporations toward balancing the interests of multiple stakeholders, allowing shareholders to earn a fair return while reducing the ability of share-traders to earn gains from speculation and financial practices that reduce innovation (Lazonick & Shin, 2020;Palladino, 2021a. ) A broad literature discusses strategies to increase worker power through collective bargaining rights.…”

“…Policies to end shareholder primacy in corporate governance include reframing the purpose of the corporation to operate in the general public benefit; reforming the fiduciary duty of boards of directors so that they are responsible for considering the impact of their decisions on all stakeholders, including the broader public and community, employees, suppliers, and customers (which means that the costs of doing business cannot be transferred to these stakeholder groups in the name of increasing shareholder wealth); and including key stakeholders-first among equals, employees-in governance and board participation (Jacoby, 2001;Palladino, 2021a). Corporate charters can require corporations to operate for the general public benefit, and can require corporate directors to take into account the impact of their decisions on all corporate stakeholders.…”

“…Darity and Hamilton propose "baby bonds" as a clear mechanism to build wealth for young people born to economically disenfranchised families, who are disproportionately in households of color, though corporate equities would not necessarily be part of the asset allocation of the baby bonds grants (Darity & Hamilton, 2012). Considering financial markets specifically, the establishment of public investment accounts and a public investment platform could democratize access to equity capital (Palladino, 2021a). Public investment accounts-which are similar to (and inspired by) the "baby bonds" proposal-are a mechanism to redress structural racism and its impact on intergenerational wealth transmission by engaging public funds in grants of equity to individuals based on household net worth.…”