Recent Scholarship: What are the Costs of Weakening Shareholder Primacy? DExit and Corporate Purpose Implications

By Benjamin Bennett, René M. Stulz, and Zexi Wang

From time to time I like to highlight recent scholarship that I found interesting and/or provocative. This post discusses a new paper—"What are the costs of weakening shareholder primacy? Evidence from a U.S. quasi-natural experiment" by Bennett, Stulz, and Wang (2025)—on what the authors call shareholder primacy, which they define as:

Mainstream corporate governance doctrine in the U.S. posits that the board of directors’ and officers’ primary responsibility is to the shareholders. This is the doctrine of shareholder primacy. Typically, shareholders want the directors and officers to maximize firm value and, consequently, the duty of directors and officers is to maximize shareholder wealth.

In my scholarship, I argue that shareholder primacy is a broader concept. Shareholder primacy models contend not only that shareholders are the principals on whose behalf corporate governance is organized, but also that shareholders do (and should) exercise ultimate control of the corporate enterprise. Hence, what Bennett et al. refer to as shareholder primacy is really better referred to as shareholder value maximization.

But that’s a quibble to a strong article that make a valuable contribution to two core debates in corporate governance. The first is the never ending debate over corporate purpose; i.e., between shareholder value maximization and stakeholderism. The second is the DExit debate; i.e., should firms incorporated in Delaware reincorporate in other states.