Shareholder Primacy Isn’t the Best of All Possible Worlds

In a recent opinion piece in the Financial Times[1], Harvard Law School Professor Jesse Fried makes a strong case that the Business Roundtable’s CEOs statement, in which they committed to “lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders,” by itself will not affect how CEOs run their companies. This is surely correct. But he overstates his case by treating the current “shareholder primacy” system of corporate governance as both the historical norm and the ideal system.

Fried bases his argument for shareholder primacy on the binding contractual nature of corporate … Read more