Comment on Elhauge
Does Greater ManagerialFreedom to Sacrifice ProfitsLead to Higher SocialWelfare?
John J. Donohue
According to the dominant view of the law and economics literature, corporate managers have a duty to maximize profits within the constraints established by law on behalf of the firm’s shareholders.1 It is recognized, however, that in practice, this duty is not legally enforceable because the business judgment rule affords managers great freedom to govern the firm without significant interference from judges. Any well-counseled manager can successfully insulate virtually any business decision—including the implementation of proenvironmental measures not mandated by law—from attack by invoking the appropriate words designed to ...
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