Brett McDonnell

Stakeholder Engagement

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A common argument against stakeholder governance is that it renders managers less accountable while doing little to improve the welfare of stakeholders. Lucian Bebchuk and Roberto Tallarita call this “The Illusory Promise of Stakeholder Governance.” But what if stakeholder governance actively empowered stakeholders? Rather than being merely just of and for the stakeholders, it could become governance by the stakeholders as well.

In a new article, I survey disclosure by S&P 100 companies to get a picture of how they engage their stakeholders and incorporate that engagement into corporate governance. I look primarily at disclosure in the companies’ sustainability or … Read more

Why Many Small Companies Have So Far Missed Out on the Paycheck Protection Program

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The Paycheck Protection Program (PPP) is a critical part of the CARES Act, which helps individuals and organizations ride out Covid-19’s initial damage to the U.S. economy. PPP provides for loans to small businesses, and Congress should focus on keeping money available and making it easier for small businesses without pre-existing bank relationships to get loans. (One way to do that would be to waive the anti-money-laundering rules and instruct bank regulators to create a comprehensive online list of lenders willing to make PPP loans to new clients).

Instead, the PPP is beset by controversy. Big restaurant chains like Ruth’s … Read more

Benefit Corporations and Public Markets

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Benefit corporations are a new legal form of business association created to support social enterprises. Over half of U.S. states have adopted a benefit corporation statute, and over 2,000 companies have chosen the form. So far, almost all of these are closely held corporations. However, if this innovation really takes off, publicly traded companies may choose to become benefit corporations. It is instructive to consider the problems such companies may face, and what corporate governance mechanisms might help address those problems. In a recent paper I explore these questions, with a particular focus on the structure of early experiments in … Read more

Short and Long Term Investors (and Other Stakeholders Too): Must (and Do) Their Interests Conflict?

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The world of corporate governance is undergoing two intense, inter-related debates. One is a debate as to whether profit-maximization in the short term is really different from profit-maximization in the long term, and if so whether American corporations are currently too short-termist. The second debate is whether shareholder profit maximization is and should be the exclusive goal for corporate managers.   The debates are inter-related because corporations focused on long term rather than short term profits are likely to more fully take into account the interests of other stakeholders, although even a robust focus on the long term will not fully … Read more

Benefit Corporations: Do the Benefits Exceed the Costs?

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Benefit corporations are a hot new innovation in corporate law. In just a few years over half of the states have adopted benefit corporation statutes, aiming to provide a form of business association adapted to social enterprises which blend profit-making with other social purposes. Between 1,000 and 2,000 businesses have adopted the new form so far. Is there a need for benefit corporations? What explains the political success of this legal innovation? And what will it take for benefit corporations to become a widely-used tool?

The entrepreneurs who found, and other investors who help fund, social enterprises want to do … Read more