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Watts, Peter --- "Shareholder Primacy in Corporate Law – A Response to Professor Stout" [2012] ELECD 384; in Vasudev, M. P.; Watson, Susan (eds), "Corporate Governance after the Financial Crisis" (Edward Elgar Publishing, 2012)

Book Title: Corporate Governance after the Financial Crisis

Editor(s): Vasudev, M. P.; Watson, Susan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857931528

Section: Chapter 2

Section Title: Shareholder Primacy in Corporate Law – A Response to Professor Stout

Author(s): Watts, Peter

Number of pages: 5

Extract:

2. Shareholder primacy in corporate
law ­ a response to Professor Stout
Peter Watts

SHAREHOLDER PRIMACY IN CORPORATE LAW

There is one key proposition in Professor Stout's chapter, which is
directed to United States law, that I think is true of orthodox company law
in the Commonwealth. This is that there is no legally enforceable duty on
directors to maximize profits for shareholders. If, therefore, one identifies
`shareholder primacy' with `profit-maximization', then one might agree
with her that the attempt to promote shareholder primacy as a legal norm
is both heterodox and unwise.
However, in New Zealand anyway, it is not usual to identify share-
holder primacy with profit maximization. Rather the phrase is taken more
literally. It imports that it is the interests of shareholders that directors
are to pursue, if necessary above those of others. Those interests might
embrace things other than short-term profits. In this part of the world, and
in some others, the central debate in relation to shareholder primacy is not
about profit maximization but about the broader issue of whether direct-
ors are legally obliged to have regard to the interests of `stakeholders'
other than shareholders. Although Professor Stout's analysis is directed to
the narrow issue of profit maximization, I believe that some aspects of her
argumentation do, misguidedly, give credence to the view that directors
should be legally obliged to consider the interests of other stakeholders.
Hence, in the very first paragraph of her chapter Professor Stout states:

Of all ...