Wednesday, June 3, 2015
I just returned early Monday from this year's Law and Society Association conference. I presented my paper on LLC operating agreements as contracts--about which I later will blog here--on a panel as part of a CRN (Collaborative Research Network) on corporate and securities law. I enjoyed the conference and being in Seattle (a city I rarely get a chance to visit).
I noticed something in a number of the sessions I attended, however, that I want to share here. A number of scholars referenced, in their presentations or in comments to the presentations of others, "shareholder primacy." As I listened, it was clear these folks were referring to the prioritizing of shareholder interests--especially financial interests--ahead of the interests of other stakeholders in corporate decision-making, rather than the elements of corporate control (few as there are) enjoyed by shareholders. As I began to recognize this, several things happened in rapid succession.
First, I remembered David Millon's recent paper on this subject, which (among other things) tells a history of the use of the "shareholder primacy" term. It's well worth a read. Or a re-read!
Second, I remembered Steve Bainbridge's earlier work on this same topic. Ditto on that paper; read it or re-read it. His chart in Figure 1 of that paper is an amazing visual summary.
Third, and largely as a result of those two papers, I wondered why we use the same term for these two aspects of corporate modeling (whether you label them them radical versus traditional shareholder primacy, shareholder protection versus monitoring, corporate ends versus means, or anything else). It's confusing! I kept wanting to interrupt, as folks were using "shareholder primacy," to ask: "which kind?" to move my understanding and analysis further forward faster.
Here's my pitch. I advocate moving away from using the term "shareholder primacy" when a more specific term is available. In the alternative, I advise defining the use of "shareholder primacy" in context when it is used, whether orally or in writing. Am I alone in being unsettled by this? Am I being too pedantic or controlling in my advocated solution or advice? I welcome your views.