Shareholder primacy

Shareholder primacy is the view that a corporation’s primary purpose is to maximize value for its shareholders. It treats shareholder interests as the central guide to corporate decision-making.

Corporate governance: The systems by which corporations are directed, monitored, and held accountable. Shareholder primacy is a theory about whose interests corporate governance should prioritize.
Berle–Dodd debate: A 1930s debate over whether corporate managers should serve shareholders alone or broader social interests. It framed an enduring dispute over the constituency corporate managers should serve.
Stakeholder theory: A theory that corporations should account for the interests of groups affected by their activities. It gives employees, customers, communities, and other groups standing alongside shareholders.
Agency theory: A framework for analyzing conflicts between principals and agents acting on their behalf. Shareholder primacy often frames executives as agents whose incentives should align with owners.
Business judgment rule: A legal principle that generally shields directors’ informed, good-faith business decisions from judicial second-guessing. Its deference leaves directors room to weigh competing interests while pursuing corporate goals.
Fiduciary duty: A legal obligation to act loyally and carefully for another party’s benefit. Debates about shareholder primacy often turn on whom directors’ fiduciary duties serve.
Adolf Berle: An American corporate law scholar who argued that managers should be accountable to shareholders. His position became an influential legal defense of shareholder-centered corporate accountability.
Corporate social responsibility: The idea that businesses have responsibilities to society beyond producing goods and earning profits. It challenges the claim that shareholder returns should determine corporate priorities.
Executive compensation: Pay and benefits provided to senior managers for their work and performance. Equity-based pay is often used to tie executive rewards to shareholder returns.
Revlon duties: Delaware fiduciary obligations that arise when a company undertakes a sale or change of control. They mark a context in which maximizing shareholder value can become especially salient.

Linked from 15 pages