The Ultimate Objective of the Company and the Enforcement of the Entity Maximisation and Sustainability Model

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Two theories, the shareholder primacy and stakeholder theories, have dominated the long-running debate about the objective of the company, but recently a different theory, called the Entity Maximisation and Sustainability Model (EMS), has been formulated. The EMS model focuses on the company as an entity and proposes that the object of a company is to foster entity wealth, which will involve directors endeavouring to increase the overall long-run market value of the company. This paper focuses on how the model can be enforced. After considering issues relating to the enforcement of the shareholder primacy and stakeholder theories, this paper identifies and then examines the difficulties that exist with enforcement of EMS. The paper then explores the avenues (non-contractual enforcement options) that can be used to enforce EMS. Following this, it argues for one particular mechanism, namely the derivative action procedure.

Document Type: Research Article

Publication date: April 1, 2010

More about this publication?
  • The Journal of Corporate Law Studies provides a forum for scholarship on corporate, securities and financial law broadly construed. Thus the Journal publishes articles on subjects as diverse as insolvency and the commercial conflict of laws, in addition to mainstream topics such as directors' duties and financial regulation. The Journal also embraces interdisciplinary work and work in cognate fields.Articles published in the Journal are subject to rigorous peer review. Shorter articles and notes are refereed where appropriate.
    The Journal is published twice a year in June and October.
    The journal will be of interest to academics and practitioners specialising in any of the subjects covered, and also to those with an interest in the strategic direction of the law and the influences which affect it - thus regulators, law and policy-makers, and the judiciary.
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