<story><title>A Proposed Alternative to Corporate Governance and Theory of Shareholder Primacy</title><url>https://corpgov.law.harvard.edu/2018/09/12/a-proposed-alternative-to-corporate-governance-and-the-theory-of-shareholder-primacy/</url></story><parent_chain></parent_chain><comment><author>grellas</author><text>Under modern corporate law, shareholders are the owners of the entity and its assets (operating businesses) and the ultimate governing role falls to a board of directors whose fiduciary duty is to act for the best interests of the company and its owners.&lt;p&gt;A modern B corp permits a board to balance this traditional fiduciary duty to act for the benefit of the shareholders with other specified goals defined in its charter and &lt;i&gt;agreed to&lt;/i&gt; by those shareholders.&lt;p&gt;At no point in any of this does any type of governmental authority have any say whatever concerning how the company should be managed and for whose benefit (government has a role in a technical sense only in providing a state charter giving the corporation a legal existence and in non-management aspects such as having the power to tax the entity and to enforce broadly applicable criminal and regulatory laws against it, e.g., laws against securities fraud or illegal securities offerings).&lt;p&gt;In other words, the whole modern corporate structure assumes that private actors using a state-chartered mechanism (the corporate entity) can arrange their affairs freely to optimize the management of the entity to further the economic interests of the owners of that entity. As to that part, government has no say whatever.&lt;p&gt;The Warren proposal would substitute a range of public dictates for the private choice that characterizes the current system. It would initially apply to large cap companies but there is no limiting principle preventing the idea of such public dictates being applied to any manner of corporation or, for that matter, to any other limited liability entity, whether large or small. Taken to an extreme, this sort of regime could easily be implemented in a way that transforms most forms of private enterprise into entities restricted or burdened by whatever dictates the politically-organized forces who happen to hold sway at any moment might want to decree.&lt;p&gt;Of course, none of that might happen. It is certainly possible to adopt the Warren proposal and keep it limited to a narrow sphere of enterprise (large-cap companies) where its impact might be limited. But I wouldn&amp;#x27;t bet on it. With no restraining principle behind it, the proposal could easily be the foundation for completely transforming the notion of enterprise in the United States and I for one don&amp;#x27;t want to see a day where bureaucrats, lawyers, and second-guessing judges are gnawing termite-like at the foundations of what today are vibrant and healthy businesses in the name of other goals having nothing whatever to do with the economic interests of shareholders.</text></comment>
<story><title>A Proposed Alternative to Corporate Governance and Theory of Shareholder Primacy</title><url>https://corpgov.law.harvard.edu/2018/09/12/a-proposed-alternative-to-corporate-governance-and-the-theory-of-shareholder-primacy/</url></story><parent_chain></parent_chain><comment><author>billbrown</author><text>This proposal would effectively make the federal government the Executive Chairman of a board. It&amp;#x27;s too radical and won&amp;#x27;t go anywhere, even with Democrats. It reads like establishing progressive bona fides.</text></comment>