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The Forum > Article Comments > The myth of shareholder primacy > Comments

The myth of shareholder primacy : Comments

By Charles Berger, published 13/5/2005

Chalres Berger argues company directors must consider the interests of all contributors to the success of the corporation.

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Charles Berger says: “The doctrine of shareholder primacy is.....accepted without question by most company directors.....the board of James Hardie cited a ‘duty to shareholders’ in initially refusing to cover a shortfall in the asbestos compensation fund”.

It seems to me that if company directors believe that they have to act primarily for the shareholders and then act in that belief, it doesn’t much matter what the law says unless someone raises an objection as in Delaware.

If the directors act in a way that reduces the price of shares in the market to a point where funds are withdrawn they will soon be brought to heel. How often do we see that a good sacking of the workers, or transferring their jobs off-shore, leads to a jump in the share price in anticipation of better profits? I find it hard to reconcile that behaviour of the market with any legalistic requirement for attention to the wellbeing of all those with an interest in the company.
Posted by John Warren, Monday, 16 May 2005 4:44:15 PM
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