Source: David Friedman’s Substack
by David Friedman
“In theory, private corporations are run for the benefit of their stockholders; insofar as the theory is enforced in practice, it is through two different mechanisms. One is the fiduciary obligation of corporate directors, the fact that under U.S. corporate law they are obliged to run the firm in the interest of its stockholders. How much effect that obligation has is not clear, given the obvious difficulties with having a court second guess the decisions of the firm. The second and probably more important mechanism is election of the board of directors by a vote of the stockholders. If holders of a majority of the shares are unhappy with how the corporation is being run they can replace the existing board and so the existing management.” (07/05/25)
https://daviddfriedman.substack.com/p/stockholders-vs-stakeholders