Abstract
The conventional wisdom in economics, finance and law for the last fifty years has been that companies should maximize profit or market value since this is what their shareholders want. I will argue that this is wrong. In some cases companies have a comparative advantage in doing good or avoiding harm and socially minded shareholders may be willing to give up some profit for companies to do this. I will argue that shareholders can use their “voice” to push companies to be more socially responsible via voting, and that voting can achieve socially optimal outcomes under some conditions. I will also discuss how the investment landscape is changing, how shareholders are using their voice more, and how some practical problems concerning voting can be overcome.
Recommended reading:
https://scholar.harvard.edu/files/hart/files/exit_vs_voice_april_18_2022.pdf
https://scholar.harvard.edu/files/hart/files/april_18-_newcorp1051.pdf
