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Business Organizations Law

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2010

Corporate law

Southern Methodist University

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The Cult Of Efficiency In Corporate Law, Stephen E. Ellis, Grant M. Hayden Jan 2010

The Cult Of Efficiency In Corporate Law, Stephen E. Ellis, Grant M. Hayden

Faculty Scholarship

This paper challenges a fundamental assumption of corporate law scholarship. Corporate law is heavily influenced by economics, and by normative economics in particular. Economic efficiency, for example, is seen as the primary goal of good corporate governance. But this dependence on standard notions of economic efficiency is unfortunate, as those notions are highly problematic. In economic theory, efficiency is spelled out in terms of individual preference satisfaction, which is an inadequate foundation for any sort of normative analysis. We argue that on any account of the good, people will sometimes prefer things that aren’t good for them on that ...