The Millennial Corporation
UVA Law Faculty Affiliations
In a prior paper, Shareholder Value(s): Index Fund ESG Activism and The New Millennial Corporate Governance, we argued that the index funds’ sudden shift towards socially-responsible investment, after decades of ignoring or opposing it, was driven by the competition to manage growing Millennial wealth. In our view, the main contribution of that paper was identifying sharp differences between Millennials and prior generations over investment, consumption, and employment. It has now become clear that this contribution has implications far beyond index-fund environmental, social and governance (“ESG”) activism and is in fact completely transforming the corporate world, marking a fundamental shift in how corporations function and requiring a new framework for analysis. This paper delineates a radical new framework for what we call The Millennial Corporation.
We argue that the Millennial-driven rise of stakeholderism and socially-responsible investing are features of a comprehensive cultural shift in how corporations are expected to behave, rendering earlier accounts of corporate behavior incomplete or obsolete. While there have been moments in the recent past when corporations promoted stakeholderism, these moments were transient and primarily rhetorical, with corporations quickly returning to the business-as-usual of shareholder primacy. This time, Millennials have made it impossible to return to business-as-usual. We show that, unlike Baby Boomers and Generation X, this generation is far more likely to take its politics to work, to the store or website, and to the investment portfolio. This consolidation of economic identity creates feedback effects that collapse the distinction between so-called political considerations, maximizing returns, and stakeholder interests in ways that are eroding traditional corporate law norms. Far from liberating managers from meaningful constraints--as critics of stakeholder corporate governance often allege--this new dynamic has imposed even further constraints on managers. We show that Millennial stakeholderism is fundamentally different from the stakeholderism of the past. As a result of Millennials’ influence, managers have strong incentives to promote stakeholder interests. In fact, they have no choice but to do so. Furthermore, rather than helping managers to insulate themselves, the new stakeholderism exposes managers to higher scrutiny. We present both a theoretical analysis and evidence supporting our account of the rise of the Millennial Corporation.