Summary of Public Benefit, Incorporated

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The widely held notion that public companies should make decisions based exclusively on shareholder interests is absurd, according to economist Lenore Palladino. She argues that corporations exist by “public permission” and that employees, customers and citizens deserve a say in corporate governance. Her thought-provoking essay does a good job of putting forward these ideas, though she offers few details on how some companies put them into practice. Nonetheless, getAbstract recommends this astute article to CEOs and corporate executives.

In this summary, you will learn

  • Why the idea of shareholder supremacy in corporate governance is flawed,
  • What changes in governance will help corporations pursue a public purpose and
  • What types of corporations are embracing “the stakeholder model of governance.” 
 

About the Author

Lenore Palladino is a senior economist at the Roosevelt Institute

 

Summary

A pervasive belief about corporate governance is that its only goal is to increase shareholders’ wealth. All too often, companies streamline, outsource and automate to benefit investors while ignoring the effects on workers and customers. Yet no US law mandates that shareholder interests come before those of the public. Rather, legislation creates corporations and grants them “privileges – not rights.” Citizens, through government, make corporations possible, so people should require companies to pursue public objectives, such as bearing the social costs of doing business and benefiting a broader base of stakeholders – employees, clients and society. 


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