Shareholder Primacy and Corporate Compliance
24 Pages Posted: 18 Feb 2015 Last revised: 9 May 2015
Date Written: February 23, 2015
Corporations, like the rest of us, must comply with environmental and other laws or suffer the consequences. Unfortunately, these consequences can pale in comparison to the gains to be made from non-compliance. Law-and-economics scholarship recognizes this and, by treating many laws as mere costs of doing business, encourages a certain amount of deliberate non-compliance. According to this view, corporate compliance should turn on profitability or whether compliance would otherwise benefit the firm. This Article argues that the law-and-economics scholarship is wrong on the law, wrong as a matter of economics, and not how most firms in fact behave. As for the firms that do flout applicable laws in the name of profit, the Article advances corporate law proposals and other solutions to rebalance cost-benefit analyses in favor of compliance.
Keywords: corporations, CSR, shareholder primacy, shareholder wealth maximization, law and economics, compliance, environmental law, sustainability
JEL Classification: K22, K32, L21, M14
Suggested Citation: Suggested Citation