Author: Gentile, Mary C.
Source: The Aspen Institute Center for Business Education's Corporate Governance and Accountability Project
1. What does the law require of executives and directors regarding shareholder primacy?
2. What are the degrees of freedom enjoyed by management and directors when it comes to decisions balancing shareholder value maximization, a firm's long term strategy and commitments to other stakeholders?
3. Regarding shareholder primacy, which shareholders matter? (past or future, for example)
4. Do bond-holders and other debtors matter (maximizing market value of the firm versus market value of shares)?
5. Can communication to relevant stakeholders ( a kind of "informed consent") function to expand managers' and directors' degrees of freedom when trying to look to the long term and/or consider multiple stakeholders in their decision-making, without providing a "cover" for self-dealing?
For example, some firms have used corporate filings and analyst briefings to indicate commitment to multiple stakeholders and clearly stated principles. See the Google corporate charter or the AES Corporation prospectus which states in part:
An important element of AES is its commitment to four major "shared" values: to act with integrity, to be fair, to have fun, and to be socially responsible…AES believes that earning a fair profit is an important result of providing a quality product to its customers. However, if the Company perceives a conflict between these values and profits, the Company will try to adhere to its values—even though doing so might result in diminished profits or foregone opportunities…(AES Corporation, Prospectus, June 25, 1991. pp. 27 and 28).