Document Type


Publication Title

Vanderbilt Law Review

Publication Date




Page Number



governance of modern corporations, stakeholder to shareholder, social contract


Commercial Law | Law


Two decades ago, Margaret Blair and I edited a book focused on governance of modern corporations. At the time it was evident that the dominant paradigm governing corporate governance and behavior centered on maximizing shareholder value. This was a shift in practice that began in the 1980s and was endorsed in 1997 by the Business Roundtable, when it recanted on its 1990 statement that supported a broader stakeholder view of corporate responsibilities.

The effects of the shift from a stakeholder- to a shareholder-maximizing set of practices have been devastating for American workers and the overall economy. It reinforced and accelerated managerial efforts to avoid unions and the break from norms and patterns of wage determination that had been established through collective bargaining. As unions weakened and declined from representing approximately twenty percent of the workforce in 1983 to 10.8 percent in 2020 (6.3 percent of the private sector workforce), employees lost their voice as stakeholders in corporate decisionmaking. Human resource executives in companies became “perfect agents” of their CEOs. Income inequality worsened as a larger share of national income went to capital than had been the case in the decades from the end of World War II to 1980. Wages for average workers have stagnated since 1980, producing a growing gap between productivity and wage growth. This is often referred to as a breakdown in the post-war social contract. One of the most important features of that post-war social contract was that productivity and average wages for nonsupervisory workers moved up in tandem and thereby met President Kennedy’s adage that “a rising tide lifts all boats.”



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.