Stakeholder interests United States corporate law

most states follow approach in shlensky v wrigley, directors not need maximize shareholder profits. can balance interests of stakeholders, in decision not put in floodlights play nighttime baseball games, in community s interest.

most corporate laws empower directors, part of management functions, determine strategies promote corporation s success in interests of stakeholders. directors periodically decide whether , how of corporation s revenue should shared among directors own pay, pay employees (e.g. whether increase or not next financial year), dividends or other returns shareholders, whether lower or raise prices consumers, whether retain , reinvest earnings in business, or whether make charitable , other donations. states have enacted constituency statutes , state expressly directors empowered balance interests of stakeholders in way conscience, or faith decisions dictate. discretion typically applies when making decision distribution of corporate resources among different groups, or in whether defend against takeover bid. example, in shlensky v wrigley president of chicago cubs baseball team sued stockholders allegedly failing pursue objective of shareholder profit maximization. president had decided corporation not install flood lights on baseball ground have allowed games take place @ night, because wished ensure baseball games accessible families, before children s bed time. illinois court held decision sound because though have made more money, director entitled regard interests of community more important. following similar logic in ap smith manufacturing co v barlow new jersey court held directors entitled make charitable donation princeton university on basis because there no suggestion made indiscriminately or pet charity of corporate directors in furtherance of personal rather corporate ends. long directors not said have conflicting interests, actions sustained.

dodge v ford motor co notoriously held in 1919 corporations had run profit of stockholders though states, , supreme court, have since followed view directors must balance stakeholders interests.

delaware s law has followed same general logic, though has no specific constituency or stakeholder statute. standard is, however, contested largely among business circles favor view directors should act in sole interests of shareholder value. judicial support aim typically found in case michigan in 1919, called dodge v ford motor company. here, ford motor company president henry ford had publicly announced wished not merely maximize shareholder returns raise employee wages, decrease price of cars consumers, because wished, put it, spread benefits of industrial system greatest possible number . group of shareholders sued, , michigan supreme court said in obiter dictum business corporation organized , carried on profit of stockholders. powers of directors employed end. however, in case damages claim against ford did not succeed, , since michigan law has been changed. supreme court has made clear in burwell v hobby lobby stores inc shareholder value not default or overriding aim of corporate law, unless corporation s rules expressly opt define such objective. in practice, many corporations operate benefit of shareholders, less because of duties, , more because shareholders typically exercise monopoly on control rights on electing board. assumes, however, directors not merely use office further own personal goals on interests of shareholders, employees, , other stakeholders.