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106 Cornell L. Rev. 91 (2020-2021)
The Illusory Promise of Stakeholder Governance

handle is hein.journals/clqv106 and id is 99 raw text is: THE ILLUSORY PROMISE OF STAKEHOLDER GOVERNANCE Lucian A. Bebchukt & Roberto Tallarita 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. Stakeholder- ism, we conclude, is an inadequate and substantially counter- productive approach to addressing stakeholder concerns. To assess the promise of stakeholderism to protect stakeholders, we analyze the full array of incentives facing corporate lead- ers; empirically investigate whether they have in the past used discretion to protect stakeholders; and show that recent t James Barr Ames Professor of Law, Economics, and Finance, and Director of the Program on Corporate Governance, Harvard Law School. Professor Bebchuk is serving as an advisor to the American Law Institute's project on the Restatement of the Law, Corporate Governance, which is examining the subjects of corporate purpose and social responsibility. $ Terence M. Considine Senior Fellow in Law and Economics, and Associate Director of the Program on Corporate Governance, Harvard Law School. This Article is part of the Project on Stakeholder Capitalism of the Harvard Law School Program on Corporate Governance. Responses to this Article by Einer Elhauge (Harvard Law School), Colin Mayer (Oxford University), and Aneil Kovvali and William Savitt (University of Chicago and Wachtell Lipton, respectively), are expected to be published in issue 7 of the Cornell Law Review, Volume 106, 2021. Presentation slides summarizing this Article's analysis are available at https:// papers.ssrn.com/abstract=3581299. We are grateful for conversations with and suggestions from many individu- als, including Bob Eccles, Alex Edmans, Allen Ferrell, Jesse Fried, Rebecca Hen- derson, Jeff Gordon, Assaf Hamdani, Scott Hirst, Louis Kaplow, Kobi Kastiel, Colin Mayer, Josh Mitts, Alan Murray, Guy Rolnik, Leo Strine, and Andrew Tuch. We also benefitted from the helpful comments and questions of participants in workshops at Harvard University, Columbia University, and the Corporate Law Academic Webinar Series; debates on stakeholder capitalism at Oxford (with Colin Mayer) and London Business School (with Alex Edmans); and conferences at Columbia University, the Stigler Center at the University of Chicago, Toulouse Business School in Barcelona, Northeastern University, the Milken Institute, and the ICGN Global Summit. In addition, we gratefully acknowledge the excellent research assistance of Aaron Haefner, Kevin Li, Tamar Groswald Ozery, Zoe Piel, Aisha Saad, Matthew Stadnicki, and Wanling Su. The Harvard Law School Program on Corporate Gov- ernance and the John M. Olin Center for Law, Economics, and Business provided financial support. 91

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