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What Is the Value of Other Constituency Statutes to Shareholders?
Romano, Roberta
Romano, Roberta
Abstract
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.