Response to Ann Lipton's "The Legitimation of Shareholder Primacy": Part I

An Overview

The Journal of Corporation Law has asked me to write a response to Ann Lipton’s article, The Legitimation of Shareholder Primacy.¹

Ann Lipton

Lipton’s central thesis is that the present era’s profound political polarization has driven a politicization of corporate governance. In turn, that politicization has exposed a contradiction inherent in the foundational norm of corporate law; i.e., the principle of shareholder value maximization. In its turn, the exposed contradiction has exposed the flaw in Delaware’s claim that it offers “a distinctively nonpartisan, technocratic approach” to corporate law. In its turn, that exposure has contributed to DExit.

There is a LOT going on in Lipton’s article. Among her claims are that:

• Corporate power must be perceived by society as legitimate.

• In order for corporate power to be regarded as legitimate, that power must be deployed to “prosocial” ends.

• Prosociality maps with the progressive left conception of stakeholderism.

• Shareholder primacy was invented to solve a political dilemma.

  • Relatedly, that shareholder primacy was never apolitical and that recent developments have brought that reality into the light of day.

• Corporate governance rules are at least partly symbolic, being intended to make corporate power appear professional, accountable, and socially legitimate.

All of which strike me as interesting and, in many cases, contestable. Certainly worthy of discussion.

With a cap of around 7,000 words on the response, however, space will not allow me to address all of those debates therein. Instead, my response for JCL will focus on the relevance of Lipton’s arguments for the ongoing DExit debate.

But, it occurred to me, I have a Substack. So, I plan a series of posts here commenting on other aspects of Lipton’s claims.

I would be remiss not to point out that my book, The Profit Motive: Defending Shareholder Value Maximization (AMAZON LINK), deals at great length with the shareholder primacy debate.

Herein, however, an overview of Lipton’s article.