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Shareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other stakeholders. A shareholder primacy approach often gives shareholders power to intercede directly and frequently in corporate decision-making, through such means as unilateral shareholder power to amend corporate charters, shareholder referendums on ...
Friedman introduced the theory in a 1970 essay for The New York Times titled "A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits". [2] In it, he argued that a company has no social responsibility to the public or society; its only responsibility is to its shareholders. [2]
Dodge v. Ford Motor Co., 204 Mich 459; 170 NW 668 (1919), [1] is a case in which the Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than in a manner for the benefit of his employees or customers.
The champions of profit primacy want to limit the range of shareholder input so that raising anything beyond the bottom line is deemed illegitimate. And Friedman’s 1970 essay provides a clue for ...
The idea that corporate America is built on shareholder primacy is largely fiction.
Shareholder voting, by contrast, is the purest form of shareholder primacy; it is about shareholders having the ultimate say over all other stakeholders.
In later years, Berle said squarely that the law had changed, and his original theory that the law required directors to pursue shareholder profit was now completely reversed by 1954, so that the contention that directors' exercise of corporate "powers were held in trust for the entire community". [11]
There have been plenty of examples of corporate managements and boards using "the maximization of shareholder value" as a rationale for outrageous screw-ups in recent years. That's where Lynn ...