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

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

3. 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

4. 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?

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

6. 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

7. 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

8. 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

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

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

11. Should a public corporation maximize shareholder value?

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