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This paper critiques an assessment by Bebchuk and Tallarita (BT) of the relative merits of shareholder and stakeholder governance. BT’s paper argues that stakeholder governance is either nothing more than enlightened shareholder value, or it imposes unmanageable trade-offs on directors of companies. But trade-offs are ubiquitous not just in stakeholder but also in shareholder governance, and the resulting judgments that are required of directors should not be viewed as an anathema but a fundamental function of a board, without which untenable outcomes result. The complexity that BT see in implementing a stakeholder system reflects a failure to recognize the way in which business routinely makes judgments based on its purposes and values. Purpose and values hold management to account to a degree that enlightened long-term shareholder value cannot. In seeking to demonstrate that directors are not motivated or able to promote anything other than shareholder value in a shareholder-oriented system, BT merely describe the system that they see rather than analyse what it could or should be. The paper therefore fails to provide a benchmark against which it is possible to evaluate either the comparative merits of shareholder and stakeholder systems, or alternative proposals for reform.


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