Good Company: Economic Policy After Shareholder Primacy

On the faulty intellectual origins of shareholder primacy-and how policy can win back what’s been lost.

In an era of shareholder primacy, share price is king. Businesses operate with short-term goals to deliver profits to shareholders, enjoying stability (and bonuses) in the process. While the public bemoans the doctrine for its insularity and wealth-consolidating effects, its influence over corporate governance persists. Good Company offers an exacting argument for why shareholder primacy was never the right model to follow for truly understanding how corporations operate.

Lenore Palladino shows that corporations draw power from public charters-agreements that allow corporations to enjoy all manner of operational benefits. In return, companies are meant to innovate for the betterment of the societies that support them. However, that debt-increasingly wielded for stock buybacks and shareholder bonuses-is not being repaid. Palladino theorizes a modern corporation that plays its intended role while delivering social and economic good in the process and offers tangible policy solutions to make this a reality. Good Company is both an expert introduction to the political economy of the firm-as it was, as it is, as it can be-and a calibrating examination of how public policy can shape companies, and societies, for the better.

Lenore Palladino is assistant professor of economics and public policy at the University of Massachusetts, Amherst, a senior fellow of the Roosevelt Institute, and research associate at the Political Economy Research Institute.