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Rethinking Chutes: Incentives, Investment, And Innovation, Simone M. Sepe, Charles K. Whitehead
Rethinking Chutes: Incentives, Investment, And Innovation, Simone M. Sepe, Charles K. Whitehead
Cornell Law Faculty Publications
Eighty-two percent of public firms have golden parachutes (or “chutes”) under which CEOs and senior officers may be paid tens of millions of dollars upon their employer’s change in control. What justifies such extraordinary payouts?
Much of the conventional analysis views chutes as excessive compensation granted by captured boards, focusing on the payouts that occur following a takeover. Those explanations, if they ever were complete, miss the mark today. This Article demonstrates, theoretically and empirically, that chutes are less relevant to a firm during a takeover than they are before a takeover, particularly in relation to firms that invest in …
New Thinking On "Shareholder Primacy", Lynn A. Stout
New Thinking On "Shareholder Primacy", Lynn A. Stout
Cornell Law Faculty Publications
By the beginning of the twenty-first century, many observers had come to believe that U.S. corporate law should, and does, embrace a "shareholder primacy" rule that requires corporate directors to maximize shareholder wealth as measured by share price. This Essay argues that such a view is mistaken.
As a positive matter, U.S. corporate law and practice does not require directors to maximize "shareholder value" but instead grants them a wide range of discretion, constrained only at the margin by market forces, to sacrifice shareholder wealth in order to benefit other constituencies and the firm itself. Although recent "reforms" designed to …