University of Sussex
Browse

File(s) not publicly available

The curious case of shareholder primacy norm: calling for a more realistic theory

journal contribution
posted on 2023-06-08, 14:18 authored by Jingchen Zhao
The shareholder primacy norm is the corporate governance model prevailing in the US, the UK and some other common law countries with effective legal enforcement of shareholder rights. The directors’ duties are exclusively owed to the company and the maximisation of the wealth of the shareholder is the fundamental focus of the fiduciary duties. It is constructed in terms of financing though equity, dispersed ownership, active markets for corporate control, and flexible labour markets. Companies rely more on stock and bond markets for their external financing. Corporate law provides relatively extensive protection for shareholders, with active enforcement of that protection in the court. According to the maintenance of efficiency theory, it is more efficient if directors run corporations with the aim of maximising shareholder wealth since the least cost is expended in doing this. However there are also many disadvantages to adopt shareholder norm as a dominant corporate objective principle in a jurisdiction. Shareholder primacy, as a curious and controversial case in corporate law and corporate governance, will be interpreted in this article based on various legal theories, and the advantages and objections of both models will be presented with further touch on stakeholder theory, which seems to be a more realistic theory.

History

Publication status

  • Published

Journal

International Trade and Business Law Review

ISSN

1836-8573

Publisher

Murdoch Law School

Volume

15

Page range

1-25

Department affiliated with

  • Law Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2013-02-04

Usage metrics

    University of Sussex (Publications)

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC