Stakeholder Capitalism in the Time of COVID

Abstract

This Article tests the claims of supporters of stakeholder capitalism (“stakeholderism”) in the context of the COVID pandemic. Supporters of stakeholderism advocate encouraging and relying on corporate leaders to use their discretion to serve stakeholders such as employees, customers, suppliers, local communities, and the environment. The pandemic followed and was accompanied by peak support for, and broad expressions of commitment to, stakeholderism from corporate leaders. Nonetheless, and even though the pandemic heightened risks to stakeholders, we document that corporate leaders negotiating deal terms failed to look after stakeholder interests. We conduct a detailed examination of all the $1B+ acquisitions of public companies that were announced from April 2020 to March 2022, totaling 122 acquisitions with an aggregate consideration exceeding $800 billion. We find that deal terms provided large gains for the shareholders of target companies, as well as substantial private benefits for corporate leaders.