Oliver Hart, Nobel Laureate in Economics for 2016, and economist Luigi Zingales recently published an article justifying companies’ pursuit of social objectives at the expense of profits from within the shareholder primacy framework. This Article highlights an important consequence of this approach: a new agency problem between managers and shareholders regarding social preferences. This Article provides two possible solutions to this agency problem: a bottom-up solution focused on shareholders’ ability to submit proposals on such issues and a top-down solution based on an independent board sub- committee intended to identify social objectives and forward them for shareholder approval.
Taking Shareholders' Social Preferences Seriously: Confronting a New Agency Problem,
U.C. Irvine L. Rev.
Available at: https://scholarship.law.uci.edu/ucilr/vol9/iss3/6