Shareholders V. Stakeholders: Evaluating Corporate Constituency Statutes Under the Takings Clause
Posted: 4 Sep 1998
There are 2 versions of this paper
Shareholders V. Stakeholders: Evaluating Corporate Constituency Statutes Under the Takings Clause
Date Written: June 1998
Abstract
Over one-half of the states have enacted "corporate constituency" or "stakeholder" statutes that permit managers to consider the interests of non-shareholder "stakeholders" in the corporation -- parties such as employees, customers, suppliers, and/or the local community. Such statutes are contrary to traditional corporate doctrine, which maintains that the directors owe a fiduciary duty to the shareholders to act in the shareholders' best interests and to maximize shareholder wealth. In this paper, I consider a constitutional question that has been virtually ignored in the literature to date: do the constituency statutes work an unconstitutional taking of private property in violation of the Fifth and Fourteenth Amendments? I ultimately conclude that constituency statutes as currently drafted cannot withstand a Takings Clause challenge, but that the result intended by these statutes could be achieved through careful drafting and/or the use of other constitutional tools.
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