ABSTRACT
Contemporary debates over corporate governance reform center around boards of directors. Scholars and policymakers alike propose stakeholder voice, especially boardroom representation, as the primary remedy for harms to noninvestor constituencies. Codetermination mandates, constituency duties, and similar reforms share a single premise: corporations serve shareholders because shareholders elect the board. However, that logic sits uneasily with the fact that in a substantial share of American businesses, capital cannot fire management. Dual-class charters entrench founders, fund investors cannot replace their managers, and bondholders never had the vote, yet the interests of capital suppliers are nevertheless paramount.
This Article argues that the basis of capital’s primacy has been obscured by a tradition that equates corporate governance with the board of directors. The position of capital is instead secured by a suite of extra-board enforcement tools, including mandatory information regimes policed by self-interested intermediaries, the aggregation of dispersed claims, state-backed exit rights, and contingent control-shifting rules that displace management upon default.
Setting these tools beside those of stakeholders shows why current stakeholderist reforms are likely to disappoint. Stakeholder groups lack the information, aggregation, exit, and control-displacement rights that protect capital in practice, and board representation unaccompanied by those rights grants a seat at the table without power over the menu.
Recent developments reinforce this account. Shareholder rights are themselves now being pared back, and the powers being withdrawn from dispersed public investors is flowing to controllers and incumbent managers rather than to other constituencies. This development shows that governance rights are neither natural nor inevitable. The law built them for capital, the law is now paring them back, and the law could build them for stakeholders. To achieve meaningful change, the stakeholder movement should shift its focus from board representation to the legal instruments through which corporate control is actually exercised.
An, James, Stakeholders and the Means of Corporate Control (July 29, 2026).
Leave a Reply