What Is the Value of Other Constituency Statutes to Shareholders?, 43 University of Toronto Law Journal 533 (1993)
A fixed point of corporate law is that shareholders are, and should be,
the ones whose interests count in corporate decision-making. This does
not imply that shareholders systematically exploit other participants in
the firm or otherwise defeat established expectations (notwithstanding the
implicit assumption in Joseph Singer and Jacob Ziegel's papers); such
strategies are not in the shareholders' interest because the parties are in
a repeated, long-term relationship, in which future cash flows matter.
Rather, differences in claim characteristics provide shareholders with the
best incentives regarding the long-term effects on the firm of a shortsighted
redistribution move: (1) employees and bondholders periodically
renegotiate their contracts with corporations as their relations have finite
terms whereas common stock investments have no such term limit; and
(2) while workers cannot leave their jobs to their heirs, equity claims are
transferable and expected to last beyond an individual's lifetime.
Date of Authorship for this Version
Romano, Roberta, "What Is the Value of Other Constituency Statutes to Shareholders?" (1993). Faculty Scholarship Series. Paper 1957.