For last two decades, scholars, judges, and corporations have embraced the idea that corporations should maximize benefit for shareholders. But on a lazy summer day in August of 2019, that changed. The CEOs of nearly 200 major U.S. companies released a statement embracing stakeholder theory—the idea that corporations should look after the needs of not only shareholders, but also those of employees, suppliers, community members, and others. Many applauded this as a progressive step: a way for corporations to take control back from the outsized, greedy influence of profit-driven shareholders. This Essay takes a different view, arguing that shareholders have long been advocates of the kind of progressive values that the public desires. Instead of being a step forward, stakeholder theory is another way to entrench management.
This Essay draws on hand-collected data from companies in the S&P 1500 that shows that shareholders, not management, have been the driving force behind the environmental, social, and governance principles that often align with stakeholder governance. In particular, institutional investors and proxy advisory firms have taken the lead on pushing these policies through to management. This Essay contributes to both a long-standing literature on managerial and shareholder power, and to the timeliest debate in corporate law today. On the practical side, its novel argument—one that has yet to be explored by commentators in media or scholarly circles—gives public companies a roadmap to engage in policies that better promote diversity, sustainability, and community stewardship.

Cathy Hwang & Yaron Nili, Shareholder-Driven Stakeholderism, University of Chicago Law Review Online, (2020).