Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents

Table of ContentsI. Introduction 939II. Shareholder Wealth Maximization as a Matter of Statutory Corporate Law 945III. Shareholder Wealth Maximization as a Matter of Decisional Law 950IV. Shareholder Wealth Management as a Matter of Corporate Organic Documents 956V. Resulting Implications 969VI. Conclusion 971I. IntroductionIn context, corporate law is often credited with creating, hewing to, or reinforcing a shareholder wealth maximization norm1: "A business corporation is organized and carried on primarily for the profit of the stockholders."2 Commentators from the academy (law and business) and practice (lawyers and judges) have taken various views on this asserted norm-ranging from characterizing the norm as nonexistent or oversimplified to maintaining it as simple fact.3 This Essay contributes to the ongoing discussion by engaging key components of the shareholder wealth maximization norm principally as a matter of firm-level corporate governance-the point at which applicable corporate governance law theory, policy, and doctrine intersect with a firm's organic documents (e.g., for a corporation, its charter and bylaws) and, more generally, corporate governance law practice. Relatively few commentators approach analyses of the shareholder wealth maximization norm from this perspective.Much of the debate over a shareholder wealth maximization norm focuses on theory and policy, while acknowledging and analyzing legal doctrine. This is, perhaps, unsurprising, given the relationship between legal doctrine and norms in the corporate law context. Leaving aside governance rules embedded in federal and state securities law (primarily applicable to publicly traded companies) and generally applicable common law, state corporate law-statutory and decisional-directly or indirectly supplies the legal rules for U.S. corporate governance.4 While corporate law statutory rules may, in fact, also represent or codify norms, decisional law often relies on theory and policy to fill gaps in meaning. Thus, theory and policy may "push" the law in individual settings one way or another when the issue is perceived to be one of first impression or otherwise creates legal uncertainty.Moreover, much of the existing work on the shareholder wealth maximization norm focuses on the Delaware law governing publicly held corporations.5 Again, this is somewhat unremarkable. Delaware enjoys the largest number of incorporations and most publicly traded companies are organized under Delaware law, making its law highly significant.6Critiques of the shareholder wealth maximization norm also often view corporate governance rules on a generic macro level- from a broad-based, state-oriented doctrinal viewpoint.7 Yet, corporate governance also can be viewed from the more narrow perspective of an individual state's legal doctrine (i.e., through a particular state's legislative and judicial rules only)8 or at the firm level (taking into account the effects of permitted private ordering, as well as statutory and decisional law, in a specific identified firm).9 For practitioners engaged in incorporating new firms or modifying the internal governance of existing firms, and for litigators and judges involved in adjudicating controversies regarding the same, the private ordering implications of corporate law at the firm level assume paramount importance.10Finally, shareholder wealth maximization theory focuses almost exclusively on financial wealth (i.e., pecuniary gain or profit), as opposed to other measures of satisfaction or benefit derived by shareholders from their equity ownership. …