5. Steven Denning, "Why Did IBM Survive?," Forbes.com (July 10, 2011), available at click here.
6. Stout, The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public (2012).
7. Gerald F. Davis, Managed by the Markets: How Finance Reshaped America 59-101 (2009)
8. Henry Hansmann and Mariana Pargendler, "The Evolution of Shareholder Voting Rights: Separation of Ownership and Consumption" (February 15, 2013), available at ssrn.com/abstract=2219865.
9. Milton Friedman, "The Social Responsibility of Business is to Increase Its Profits," New York Times Magazine 32 (September 13, 1970).
10. Michael C. Jensen and William H. Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure," 3 Journal of Financial Economics 305 (1976).
11. Roger Martin, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL 11 (2011).
12. Hayak, The Fatal Conceit: The Errors of Socialism (1991).
13. Rock, supra note 2 and Stout, supra note 3.
14. Stout, supra note 6, at 37-38.
15. Stout, supra note 6, at 38-41.
16. Bebchuk, "The Myth of the Shareholder Franchise," 93 Virginia Law Review 675 (2005).
17. Stout, supra note 6, at 42-44.
18. The only context in which courts require directors to maximize shareholder value is when the directors of a public company determine to sell the company to a private owner, in essence deciding to force public shareholders out of the firm. At this point shareholders are uniquely vulnerable to exploitation, and perhaps need the legal protection of the so-called Revlon doctrine. However, directors have no obligation to sell a company to a private bidder, even at a premium price. In other words, as long as a public company wants to stay public, directors have no legal obligation to maximize either profits or share value.
19. About the only empirical finding that has been reliably replicated is that when governance changes cause directors to sell a company, the buyer pays a premium over market price. This increases the wealth of shareholders in target companies. Unfortunately, it also often depresses the stock prices of bidding companies by an equal or greater amount, suggesting that mergers and acquisitions do not increase the wealth of shareholders as a class. One study has concluded that the net result for all shareholders of all mergers and acquisitions done between 1980 and 2001 was to reduce aggregate market value by $78 billion. See Stout, supra note 6, at 88-89.
20. Valentin Dimitriv and Prem C. Jain, "Recapitalization of One Class of Stock into Dual-Class: Growth and Long-Run Stock Returns," 12 Journal of Corporate Finance 342 (2006).
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
1
1
