The Incoherence of Stakeholderism

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Abstract/Contents

Abstract: Stakeholderism is a theory of corporate governance which states that directors manage the corporation in the interest of all stakeholders of the firm. This theory of corporate governance has gained increasing popularity and traction and corporate legal scholarship has sought to justify it. However, these justifications for stakeholderism are neither descriptively consistent with Delaware law nor accurate in their theories of the firm, as stakeholderists claim. Enlightened shareholder value stresses the lack of tradeoffs or the ubiquity of win-win scenarios between shareholders and stakeholders, but this is empirically dubious when considering the effect of pro-stakeholder policies on firm value. Despite the lack of justification, the desire for corporations to serve some public benefit is not going anywhere. I propose that shareholder welfare maximization is a more theoretically coherent means to justify corporate concern for social goods and that the corporate ecosystem could evolve to chiefly include shareholder value firms seeking to maximize shareholders’ economic interests, and shareholder welfare firms seeking to maximize both shareholder’s economic and social interests as their ultimate end.

Author	Wu, Jonah

DOI	https://doi.org/10.25740/cm962nk5730
Location	https://purl.stanford.edu/cm962nk5730

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Preferred citation: Wu, J. (2022). The Incoherence of Stakeholderism. Stanford Digital Repository. Available at https://purl.stanford.edu/cm962nk5730

Undergraduate Honors Theses, Symbolic Systems Program, Stanford University

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