The traditional view in corporate governance, shareholder primacy, holds that boards and executives should manage corporations with a single-minded focus on increasing financial returns to shareholders. By contrast, advocates of Environmental, Social and Governance (ESG) criteria and stakeholder models favor a broader corporate focus that considers the interests of stakeholders such as employees, customers, governments, and communities in which corporations operate. Advocates on both sides of the debate agree that corporations can increase financial returns to shareholders either productively—through value creation—or unproductively, through “value capture” or redistribution, including the creation of socially inefficient negative externalities. In the ideal, corporations would expend more resources on value creation, expend less on value capture, and thereby create more social value after accounting for the cost of negative externalities.This article presents a stylized model in which corporations are run according to the preferences of individual beneficial owners in proportion to their share voting power. Ownership levels vary dramatically throughout the population, which is divided into three groups: non-beneficial owners who have no votes, small beneficial owners who have few votes per person, and large beneficial owners, who have many votes per person and high exposures to corporate profits. Individuals are self-interested, but not exclusively focused on financial returns. They care about both the return on their investment and the direct effect that negative externalities have on themselves. Beneficial owners can spend their own money to insulate themselves from negative externalities created by corporate decisions. Returns on investment are distributed according to individual beneficial ownership levels. However, negative externalities are initially distributed either: (1) equally through-out the population; (2) in inverse proportion to beneficial ownership; or (3) negative externalities in-crease with beneficial ownership but at a slower rate than financial returns.Under various plausible assumptions regarding the distribution of negative externalities and beneficial ownership, it can be shown that allocating votes according to shareholdings (one-share, one-vote) leads to inefficient negative externalities and redistribution through corporate decision making. Moreover, shareholder-value oriented ESG will do more to limit negative externalities that adversely affect property than those that adversely affect health and safety. Allocating shareholder votes according to the principal of “one natural person beneficial owner, one vote” can create the opposite problem, excessively reducing negative externalities and inefficiently undervaluing corporate profits. Compared to either extreme, there is typically an intermediate voting rule that is more efficient. One such intermediate voting rule, granting bonus votes to each beneficial owner whose fractional beneficial ownership crosses a threshold, reduces negative externalities without inefficiently undervaluing corporate profits. This threshold should be set close to the level at which individual externality expo-sures and profit entitlements are equal.Practical implications of this model for corporate law, corporate governance, and regulation are dis-cussed
