From the National Law Review:
The problem of stakeholderism is brilliantly illustrated by the eponymous Bainbridge Hypothetical:
"[S]uppose that the board of directors is considering closing an obsolete plant. The closing would harm the plant's workers and the local community. However, the closing would benefit shareholders, creditors, and employees at a more modern plant to which the work previously performed at the old plant would be transferred. Moreover, the closing would benefit communities around the modern plant. Assume that the latter groups cannot gain except at the former groups' expense. By what standard should the board make the decision? Shareholder wealth maximization provides a clear answer to this otherwise difficult situation--close the plant. The alternative to following the shareholder wealth maximization norm would, on the other hand, force directors to struggle with indeterminate balancing standards. In turn, such standards would deprive directors of the critical ability to determine ex ante whether their behavior comports with the law's demands, thereby raising the transaction costs of corporate governance."
BTW, it turns out that post was from Keith Paul Bishop.
