Comment on: Hart: The Responsibility of Business is to Pursue Shareholder Value

Does the board of directors of a public company have a legal duty to maximize shareholder value?

Does it matter? Wide discretion to do so Business judgment rule Ends vs. means Non-shareholder constituency statutes/charter provisions Sacrifice of shareholder interests unclear Discretion vs. commitment

Commitment? Can public corporation commit to social benefit as an end? Commitment in charter legally unclear If legal, is it feasible? How would it be enforced? If permitted, how would it stick?

Feasibility in typical U.S. public company? Assume Charter can provide Profits less than maximum Initial shareholders favor

Feasibility in typical U.S. public company? How to enforce? Shareholder suits Disclose and certify—“B Corporation” Etsy (US) Natura (Brazil) Subs of Unilever (Ben & Jerry’s) Give stakeholders right to sue? Not under current law Bad idea

Feasibility in typical U.S. public company? Takeover threat / Board replacement Shareholders can change Board can be replaced Charter can be amended How to prevent? Dual class stock held by committed SHs Supermajority to amend charter (imperfect) Bottom line: possible but not easy

Other Entities Several mixed-purpose entities in different states L3C Benefit Corporation Social Purpose Corporation Some must pursue social purpose Some may pursue Privately held

Other Entities Enforcement Shareholder suits (only) Disclosure and outside certification Change in purpose Supermajority shareholder vote

Why separate entities? Basic elements standardized Builds familiarity Shared legal advice Shared judicial precedents Room for flexibility

Should a public corporation maximize shareholder value?

Reduced constraint on management? How to balance goals? Agent of many—agent of none? Enforcement difficult