William Savitt


Since, call it 1970, corporate law has operated under a dominant conception of governance that identifies profit-maximization for stockholder benefit as the purpose of the corporation. Milton Friedman’s essay The Social Responsibility of Business is to Increase Its Profits, published in September of that year, provides a handy, if admittedly imprecise, marker for the coronation of the shareholder-primacy paradigm. In the decades that followed, corporate law scholars pursued an ever-narrowing research agenda with the purpose and effect of confirming the shareholder-primacy paradigm. Corporate jurisprudence followed a similar path, slowly at first and later accelerating, to discover in the precedents and design of corporate law a far better defined profit-maximizing imperative than could have been imagined before the Friedman pronunciamento. The analytical situation seemed sufficiently tidied up by 2001 that two academic giants announced “a widespread normative consensus that corporate managers should act exclusively in the economic interests of shareholders.” We had reached, we were told, “The End of History for Corporate Law."

I’ve drafted this essay with the voice and views of Marty Lipton, my senior partner, top of mind. This is for several reasons. The first is that Marty understood with preternatural clarity the operation of the dialectic described in this essay. When shareholder primacy was maturing to its early full bloom, Marty was very nearly a lone holdout, insisting that shareholder primacy could not endure. His 1979 article articulating that view, “Takeover Bids in the Target’s Boardroom,” was and remains a true classic. Mr. Lipton’s article anticipated the flaws in Friedman’s share-holder-primacy narrative that would not become broadly apparent for 30 years. He saw incommensurability and anomaly in the shareholder-pri-macy paradigm, and the necessity of today’s corporate law revolution, while the rest of the legal community was settling in for a long period of “normal science.”

Even more, though, is this: Marty does not just talk about stakeholder governance; he lives it. It is the great privilege of my professional career to have practiced law at the law firm he built. Marty built it on the belief that everyone at the firm is family. And on the belief that commitment to craft, and client service, and tireless effort, and community engagement, and thought leadership, and constant innovation, and respect for every employee anywhere within the firm’s walls, could all be harmonized into a coherent scheme of organizational governance designed to produce the world’s best law firm. We should allow our corporate leaders the chance to strive for the same.

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