Clarifying Terms in the Debate regarding ‘Shareholder Primacy’

The Hayne Royal Commission has reinvigorated debate regarding shareholder primacy in Australia. However, this debate has not always been informed by a shared understanding of what this theoretical approach entails. We compare recent Australian papers on this topic with key papers by seven prominent shareholder primacy scholars, dating from the 1930s to the 2010s. Some contributors to the Australian debate appear unaware that prominent shareholder primacy theorists require directors to focus exclusively on shareholders’ interests; emphasise shareholders’ long-term financial interests; and would not object to the ‘enlightened shareholder value’ approach. Further, whereas some assume that ‘shareholder primacy’ is a singular position, we argue it is more accurate to distinguish four categories of shareholder primacy: ‘wealth maximisation (shareholder protection)’; ‘wealth maximisation (shareholder autonomy)’; ‘bounded wealth maximisation (shareholder protection)’ and ‘bounded wealth maximisation (shareholder autonomy)’. Finally, several aspects of shareholder primary require further clarification in light of challenges associated with climate change