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For Whom Corporate Leaders Bargain (Forthcoming, Southern California Law Review, Volume 93, 2021) Lucian A. Bebchuk, Kobi Kastiel, Roberto Tallarita.


At the center of a fundamental and heated debate about corporate purpose, an increasingly influential “stakeholderism” view advocates giving corporate leaders the discretionary power to serve all stakeholders and not just shareholders. Supporters of stakeholderism argue that its application would address growing concerns about the impact of corporations on society and the environment. By contrast, critics of stakeholderism argue that corporate leaders should not be expected to use expanded discretion to benefit stakeholders. This Article presents novel empirical evidence that can contribute to resolving this key debate.

Stakeholderist arguments regarding the potential stakeholder effects of hostile takeovers contributed to the adoption of constituency statutes by more than thirty U.S. states. These statutes, which remain in place and continue to govern corporate transactions, authorize corporate leaders to give weight to stakeholder interests when considering a sale of their company. We study how corporate leaders in fact used their discretion in transactions governed by such statutes in the past two decades. In particular, using hand-collected data, we provide a detailed analysis of more than one hundred cases governed by such statutes in which corporate leaders negotiated a company sale to a private equity buyer.

We find that corporate leaders have used their discretion to obtain gains for shareholders, executives, and directors. However, despite the clear risks that private equity acquisitions often posed for stakeholders, corporate leaders generally did not use their discretion to negotiate for any stakeholder protections. Indeed, in the small minority of cases in which some stakeholder protections were formally included, they were generally cosmetic and practically inconsequential.

Beyond the implications of our findings for the long-standing debate on constituency statutes, these findings also provide important lessons for the ongoing debate on stakeholderism. At a minimum, stakeholderists should identify the causes for constituency statutes’ failure to deliver stakeholder benefits in the analyzed cases, and examine whether embracing stakeholderism would not similarly fail to produce such benefits. After examining alternative explanations for our findings, we conclude that the most plausible explanation lies in corporate leaders’ incentives not to protect stakeholders beyond what would serve shareholder value. Our findings thus indicate that stakeholderism cannot be relied on to produce its purported benefits for stakeholders. Stakeholderism therefore should not be supported as an effective way for protecting stakeholder interests, even by those who deeply care about stakeholders.

This paper is part of a larger research project of the Harvard Law School Corporate Governance on stakeholder capitalism and stakeholderism. Another part of this research project is The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita.


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