Resource title

Stakeholder orientation vs. shareholder value - a matter of contractual failures

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Resource description

Abstract: This article analyzes the conflict of interests between shareholders andother stakeholders, including when such conflicts of interests may arise. It is arguedthat shareholder value cannot be justified simply by referring to any prerogativeproperty rights of the shareholders. Instead, shareholder value coincides with theefficient hypothetical perfect contract. However, due to contractual failures in certainbargain situations, management may be unable to "internalize the firms externalities".This means that in these situations there is a tradeoff between a broad duty of loyaltyfor management in listed firms and other traditional remedies. The theoretical insightsare applied on a case from the Danish Supreme Court (Louis Poulsen A/S) where theinterests of the stakeholders were decisive. However, it is shown that the verdict mayinstead harm the relevant stakeholders illustrating how cautious the legal systemshould use a doctrine based on the "company’s interests". In addition, the notion of afirm’s social responsibility is critically evaluated together with the associated pitfallsof accepting this concept.

Resource author

Caspar Rose

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/6796

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