The shareholder wealth maximization doctrine requires the public corporation to pursue a single purpose to the exclusion of all others: increase the wealth of shareholders by increasing the value of their shares, within the confines of the law. The doctrine prohibits the corporation from forgoing even a dime of shareholder wealth to benefit the environment, charities, or the corporation’s other stakeholders. Those other stakeholders are the corporation’s customers, employees, managers, creditors, suppliers, communities in which the corporations do business, and the public. If shareholders can benefit from socially harmful but legal action—such as burning of fossil fuels, moving jobs offshore, price gouging on life-saving drugs, shifting liabilities to corporate shells, or sourcing raw materials from human rights violators—the doctrine requires that the corporation take those actions. As a result, the doctrine is the principal legal barrier to the environmental, social and governance (ESG) role of the public corporation. This Article will refer to both the noun, “shareholder wealth maximization,” and the verb, “shareholder wealth maximize,” as “SWM” to make it easier for readers to distinguish those concepts from similar terms.
UC Davis Law Review, Forthcoming