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From Primacy to Commitment: Revising corporate governance theories to account for recent legal innovations in the US

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  • Kevin Levillain

    (CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

  • Blanche Segrestin

    (CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

For more than twenty years now, Corporate Governance scholars have hesitated between shareholder, director and stakeholder primacy, making the purpose of the corporation " the most important issue in corporate law ". In this paper, we conduct an extensive review of the arguments supporting either of these views in the US context, which shows that analyzing corporate governance through the lens of " primacy " inevitably leads to inconsistent and contradictory interpretations. In the current exploration of new business practices to deal with urgent societal challenges, this misinterpretation undermines the search for conditions to temper the dominant " shareholder value maximization " norm without jeopardizing control and efficiency. Instead we show that interpreting recent US legal innovation requires to drop the concept of " primacy " and to view corporate law as enabling a variety of distribution of decision rights between shareholders and directors. In this light, our model shows that if one is to foster companies' responsible behaviors, it appears necessary to secure both shareholders' and directors' commitment towards a broader purpose. This " commitment " model opens avenues for designing new effective governance practices, including the recent " Benefit Corporation " forms.

Suggested Citation

  • Kevin Levillain & Blanche Segrestin, 2018. "From Primacy to Commitment: Revising corporate governance theories to account for recent legal innovations in the US," Post-Print hal-01777788, HAL.
  • Handle: RePEc:hal:journl:hal-01777788
    Note: View the original document on HAL open archive server: https://hal.science/hal-01777788v1
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    References listed on IDEAS

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    Cited by:

    1. Samantha Ragot & Blanche Segrestin, 2019. "Profit-with-purpose companies and institutional dynamics: lessons from a public service company," Post-Print hal-02132542, HAL.
    2. Samantha Ragot & Blanche Segrestin, 2019. "Profit-with-purpose companies and institutional logics' dynamics: lessons from a public service company," Post-Print hal-02445262, HAL.

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