Cornell Law Review

On the Promise of Stakeholder Governance: A Response to Bebchuk and Tallarita

William Savitt, Partner, Wachtell, Lipton, Rosen & Katz

Aneil Kovvali, Harry A. Bigelow Teaching Fellow & Lecturer in Law, University of Chicago Law School

Professor Bebchuk and his coauthor Roberto Tallarita have launched a broadside against recent efforts of business leaders, scholars, and lawyers to promote a corporate governance model that permits directors to take into account interests other than stockholders—a governance regime that authorizes directors to manage their corporations having in mind the interests not of stockholders alone,…

Feb 2022

Article

The Illusory Promise of Stakeholder Governance

Lucian A. Bebchuk, James Barr Ames Professor of Law, Economics, and Finance, and Director of the Program on Corporate Governance, Harvard Law School

Roberto Tallarita, Terence M. Considine Senior Fellow in Law and Economics, and Associate Director of the Program on Corporate Governance, Harvard Law School

To address growing concerns about the negative effects of corporations on their stakeholders, supporters of stakeholder governance (“stakeholderism”) advocate a governance model that encourages and relies on corporate leaders to serve the interests of stakeholders and not only those of shareholders. We conduct a conceptual, economic, and empirical analysis of stakeholderism and its expected consequences. Stakeholderism, we conclude, is an inadequate and substantially counterproductive approach to addressing stakeholder concerns.

Dec 2020