Shareholder Primacy and the Distribution of Wealth

Paddy Ireland

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Corporate Finance and Governance Corporate Governance and Law Housing, Finance, and Neoliberalism

Abstract

In recent years a growing consensus has emerged in favour of the shareholder-oriented model of the corporation. Increasingly, this model is justified not on the basis of shareholder ownership rights but on efficiency grounds: whoever the immediate and direct beneficiaries of shareholder-orientation, it is argued, it ultimately indirectly benefits everyone by ensuring the maximization of aggregate social wealth. The prevalence of this view has caused the distributional dimensions of corporate governance to be neglected. This paper examines the distribution of share ownership and financial wealth in the US and the UK. Although share ownership has become more widely spread, it argues, it remains very heavily concentrated with the result that shareholder primacy is in reality the primacy of a small privileged elite. After an exploration of the contradictions of working class shareholding and the impact of greater shareholder-orientation on the distribution of wealth, the paper concludes by re-evaluating Hansmann and Kraakman's ‘end of corporate history’ thesis, arguing that recent developments represent a triumph not for efficiency but for the growing power of the shareholder class.

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References

2000Investor protection and corporate governance 1995Why do so Few Hold Stocks?1999A Theory of Path Dependence in Corporate Ownership and Governance 2000Stock Market Wealth and Consumption 2004A theory of path dependence in corporate ownership and governance 1996A Self-Enforcing Model of Corporate Law 1999Company Law and the Myth of Shareholder Ownership 2003Shareholder Primacy and the Trajectory of UK Corporate Governance

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2017Global inequality chains: integrating mechanisms of value distribution into analyses of global production 2008Maximizing shareholder‐value 2010Corporate Social Responsibility in a Neoliberal Age 2007The Law of Society: Governance Through Contract 2006Realigning the Corporate Building Blocks: Shareholder Proposals as a Vehicle for Achieving Corporate Social and Human Rights Accountability 2013What is the corporation and why does it matter?

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