Corporate Goal

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  • Cover Type: Hardcover | Hebrew
  • Number Of Pages: 374 Pages
  • Price: 290 NIS

What are the objectives of a corporation? On whose behalf should it act—shareholders, creditors, employees, consumers, or executives? This book examines whether a balance can be struck between the good of the corporation itself and the competing needs of its stakeholders.

The worldwide economic crisis in 2008 was a test in which most of the basic axioms of the corporate world collapsed. It emerged that the scale of the market failures and human greed do not allow businesses to be run without regulatory oversight.

This volume by Prof. Yedidia Stern, along with his previous book, Ownership in Companies, deals with one important way of understanding how the worldwide crisis came about, and both books suggest a practical and principled manner of dealing with it. In the first book, Prof. Stern suggested that a company is an ownerless independent entity. This claim is supported in the theoretical world in the legal domain and recognition of facts in the real world, leading to the conclusion that corporate shareholders should not be viewed as owners of the company. This volume deals with an overlapping and complementary issue: What is the purpose of a corporation’s activity? On whose behalf is it supposed to operate? What functions and goals should guide its path?

The question of ownership and the question of purpose are intimately connected. Most human wealth is concentrated in the hands of corporations, which accordingly exert a strong influence on people’s lifestyles, quality of life, and even the very existence of many individuals. The wealth and interests of companies propel forces that influence the media, culture, science, politics, and the marketplace of ideas. At key junctures, Western corporations—including banks, insurance companies, industrial and service companies, giant concerns and small businesses—chose the path that brought them large short-term profits consistent with the interests of investors, and did not give sufficient weight to the interests of other parties. The lack of sufficient attention to others swept the Western economy to dangerous places. This choice has had a negative influence on the economic, political, and social environments.

This book examines a view that is widespread in common law—namely, that the purpose of a company is to make a profit for the shareholders—and exposes the shortcomings of this view from the perspective of economic utility. Next, alternative answers to the riddle of purpose, offered by comparative law or discussed in the theoretical literature, are examined and found to be unsuitable. Finally, the book recommends the appropriate purpose for the corporation—increasing the profit of society as a whole. This idea has many ramifications and has the potential to promote objectives of economic efficiency alongside a proportionate consideration of valuable social objectives. The book also examines the suitability of the proposed Israeli Corporations Law and suggests a possible interpretation of the law.

Preface and Acknowledgments

Chapter 1 Introduction

Part One: Prevailing Norm and Its Failure

Chapter 2 Prevailing Norm: Increasing Shareholder Gain
2.1  Prevailing American Law
2.2  Prevailing British Law
2.3  Justification of the Law

Chapter 3 Critique of the Prevailing Norm: Considerations of Economic Efficiency
3.1  Externalizing Costs
3.2  Harming Corporate Interests
3.3  The Standard in the Prevailing Norm
3.4  Summary

Part Two: The Need for Legislation

Chapter 4 Contractual Solutions
4.1  The Contractual Argument
4.2  Critique of the Argument
4.3  Conclusion

Chapter 5 Market Solutions
5.1  Argument Based on Market Forces
5.2  Critique of the Argument

Chapter 6 General Regulatory Solutions
6.1  Argument Based on General Regulation
6.2  Critique of the Argument
6.3  Conclusion

Chapter 7 Corporate Law Solutions
7.1  Possibilities for Reform
7.2  Survival of Reforms
7.3  The Implications of the Reform

Part Three: Comparative Law

Chapter 8 The Law in American States: Constituencies Statutes
8.1   Description
8.2   Practical Effects
8.3   Evaluation

Chapter 9 Delaware: Fiduciary Duty of Corporate Officers

Chapter 10 Europe
10.1  Germany
10.2  The European Union
10.3  France

Chapter 11 Japan

Chapter 12 Overview
12.1  Comparison of Models of Corporate Governance
12.2  The End of History? The Global Unification Debate

Part Four: The Preferred Law

Chapter 13 The Desired Goal: Corporate Model
13.1  Shareholder Model
13.2  Constituencies Model
13.3  Public Model
13.4  Corporate Model

Chapter 14 Significance of the Corporate Model
14.1   The Model and Common Arguments
14.2   The Model as a Natural Solution
14.3   The Difference between the Corporate Model and Other Models
14.4   The Flexibility of the Model
14.5   Special Case: Final Transactions
14.6   The Constitutionality of the Model

Chapter 15 Practical Effects of the Corporate Model
15.1  Specific Business Dilemmas
15.2  General Business Dilemmas
15.3  Summary

Part Five: The Preferred Law and Israeli Law

Chapter 16 Clause 11 of Israeli Corporate Law
16.1   Corporate Goal in Clause 11
16.2   The Novelty of Clause 11

Chapter 17 Content of the Objective Clause
17.1  "To Act According to Business Considerations"
17.2  "To Increase Profits"
17.3  "And To Allow Taking It into Account as a Consideration"
17.4  "Among Others"

Chapter 18 Purpose of the Objective Clause
18.1  Corporate Interests
18.2  Ambiguous Terms
18.3  Those Entitled to Impose the Norms

Chapter 19 Evaluation of the Influence of the Objective Clause

Chapter 20 Summary

Index of Sources

1. Legislation
    1.1  Israeli Legislation
    1.2  Foreign Legislation

2.  Rulings
     2.1  Israeli Rulings
     2.2  Foreign Rulings
3.   Articles
4.   Books
5.   Reports and Policy Paper