Kelli A. Alces


For decades, those holding the shareholder primacy view that the purpose of a corporation is to earn a profit for its shareholders have been debating with those who believe that corporations exist to serve broader societal interests. Adolph Berle and Merrick Dodd began the conversation over eighty years ago, and it continues today, with voices at various places along a spectrum of possible corporate purposes participating. Unfortunately, over time, the various sides of the debate have begun to talk past each other rather than engage with each other and have lost sight of whatever common ground they may be able to find between them. This Essay shows how the gaps between the two perspectives may be bridged, or how the two camps may be brought closer to engaging in meaningful dialogue, by considering the insights contained in Margaret Blair and Lynn Stout’s A Team Production Theory of Corporate Law. Blair and Stout paint a picture of corporate governance that helps explain why the business judgment rule works as it does and how corporate boards can legally and properly make a variety of decisions in particular situations. They show how it is permissible for a board to make decisions that appear to place the interests of nonshareholder stakeholders before the immediate interests of shareholders without running afoul of their duties under corporate law. Though Blair and Stout purport to reject shareholder primacy throughout the article, their insights do not necessarily undermine a realistic shareholder primacy view of corporate governance. Rather, their description of the board of directors and proper corporate objectives provides a positive account of how directors manage the coalition of interests that make up the corporation. This account does not render shareholder wealth maximization impossible. In this Essay, I will bring these competing ideas together and show how they are compatible within one description of modern corporate governance. This Essay proceeds in four parts. Part II begins by reviewing the relevant portions of the debate between “shareholder primacists” and those who believe that directors should make decisions that serve other stakeholders to the exclusion of shareholder interests. Blair and Stout position themselves somewhat in the middle of these two positions while maintaining that shareholder primacy is not a viable positive or normative theory. Because Blair and Stout’s claim is a moderate position, their work can serve as an effective gateway between the two sides. Part III cultivates an understanding of shareholder primacy that demonstrates that such a view is not necessarily incompatible with the corporate wealth maximization sought by Blair and Stout. Part IV considers what Blair and Stout mean by “balance” in corporate governance and shows how that balance can be a means to shareholder primacy ends. Part V briefly concludes.