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My new casebook Advanced Corporation Law is in galley

I'm very excited to announce that I've gotten the galleys for my forthcoming casebook on Advanced Corporation Law. It will be coming out in the fall for Spring 2021 adoptions.

This text is designed for use in an advanced course in corporate law and governance. It assumes that students have taken a basic course in Corporations or Business Associations.

Corporate governance has been much in the news in recent years and lawyers are devoting increasing amount of attention to it. The passage of major federal legislation in 2002 (the Sarbanes-Oxley Act a.k.a. SOX) and 2010 (the Dodd-Frank Act) were particularly important developments, generating much new law and, as a result, much new legal work. Curiously, however, the law school casebook market has largely ignored these trends.

Corporate governance is regulated by many of the same laws covered in the basic Business Associations course, but increasingly is also regulated by laws¾such as SOX and Dodd-Frank¾that get short shrift in the typical Business Associations casebook and course. In contrast, those laws are the core focus of this text.

Unlike the more basic topics that dominate Business Associations, which are a product of state corporate law with a minor federal overlay, corporate governance is regulated by a much more complex body of law that emanates from multiple regulators. Many of the rules of corporate governance come from traditional state corporate and federal securities law sources, but many more come from sources such as stock exchange listing standards or rules issued by the Public Company Accounting Oversight Board and similar quasi-governmental bodies. All of these are grist for the mill in this text.

Importantly, however, lawyers practicing in the corporate governance space must be knowledgeable not only about the law but also best practice. As Sir Adrian Cadbury observed in connection with the United Kingdom’s adoption of the so-called Cadbury Code, it is tempting for managers to obey the letter of law while ignoring the deeper purposes behind it. Sound corporate governance structures thus must be informed as much by best practices as well as formal legal rules.

Likewise, this text assumes that mastering the relevant law requires situating it in an understanding of the contemporary business environment. The legal issues governing executive compensation makes little sense, for example, if one does not understand the political and economic debate over CEO pay. Similarly, to cite just one more example, mastering the high-profile issues respecting shareholder rights will be much easier if the students are familiarized with the changing demographics of shareholders and the rise of activist hedge funds.

Notice that I refer to this book as a text rather than a casebook. Although the text includes many canonical cases presented in the traditional format, the case method is not the only—or even always the best—way of teaching students to draft workable contracts and disclosure documents, conduct due diligence, or counsel clients on issues that require business savvy as well as knowing the law. Accordingly, the book also relies on textual explication, sample documents, and problems to build student transactional skills.

This approach is driven by my belief that, because lawyers plan at least as often as they litigate, advanced business law course texts need to adopt a transaction planner’s perspective. Most law school casebooks—even in the corporate law area, where the authors ought to know better—have an inherent bias towards litigation perspectives due to their emphasis on cases. I avoid that by using additional sources, such as law review articles and regulatory materials, and by including numerous problems—typically at the start of a block of material—requiring students to think about how the materials will affect real world transactions and planning.

The text assumes familiarity with some basic law and economics tools—such as transaction costs and agency costs—that are commonly used in many business law classes. Indeed, the central theme of this text is the agency costs resulting from the separation of ownership and control in public corporations. The appendix offers a brief overview of these tools for the benefit of those students who have not encountered them previously.

A Global Perspective on Say on Pay

An interesting comparison of the US and UK, which have say on pay, and Hong Kong and Singapore, which do not.

Critics of Corporate Stock Buybacks Leveraging COVID19 Crisis to Advance Policy Goals

Our friend Harvard law professor Jesse Fried posted an essay coauthored with Charles Wang on the titular topic at the Harvard Forum:

Critics of stock buybacks, heeding Rahm Emanuel, are not letting a serious crisis go to waste. They found a way to blame repurchases for COVID-19’s economic fallout, and are exploiting COVID-19 to try to curb their use. But critics’ claims are faulty, and proposed buyback restrictions may well exacerbate COVID-19’s ill effects.

Buyback critics have long asserted that repurchases starve firms of cash, with little supporting evidence. But COVID-19 seems to provide a perfect poster child for the anti-buyback cause: bailout-seeking airlines. Citing a Bloomberg analysis that 96% of airlines’ total free cash flow over the last decade was spent on repurchases, critics blamed buybacks for the firms’ desperate plight. But this 96% figure is misleading. It does not take into account equity and debt issuances by airlines, which largely offset the cash paid out in buybacks. “Unfunded” payouts to shareholders were much lower.

Kindly go read the whole thing.

Refuting the #BailOutPeopleNotCorporations hashtag

From Twitter:

The trending hashtag #BailOutPeopleNotCorporations is founded on a basic error; namely, reification. While it may be necessary to reify the corporation for semantic convenience, it can mislead.

Conceptually, the corporation is not a thing, but rather simply a set of contracts between various persons pursuant to which services are provided and rights with respect to a set of assets are allocated.

When we "bail out" a corporation, what we're really doing is redirected wealth from taxpayers as a whole to the subset of individuals who collectively make up the corporation. We thus have to make a decision: In a period of economic triage, is this group of people worth saving? Are the jobs of these employees worth preserving. Are the savings of these shareholders worth preserving?

Concomitantly, we need to consider the problem of agency costs. Corporations are not democracies. They are run by managers and executives. Hence, once we decide that a particular group of people is worth saving (in an economic sense), we need to ensure that managers and directors cannot divert the "bail out" funds from the desired goals. This is a non-trivial design problem. The TARP bail out in the financial crisis was not well designed. We need to do better this time.

SCOTUS Oral Arguments on the CFPB: Will Kavanaugh Remember to Cite Yours Truly?

Bloomberg reports that:

The U.S. Supreme Court seemed inclined to give the president more power over the Consumer Financial Protection Bureau as the justices considered whether Congress went too far in trying to insulate the agency from political pressure.

Hearing arguments in Washington Tuesday, the court’s conservatives suggested they agreed with Trump administration contentions that the Constitution requires the president to have broad ability to fire the agency’s director. When Congress set up the agency, it gave the director a five-year term and said the person could be ousted only for specified reasons.

Justice Brett Kavanaugh noted that the current CFPB director, an appointee of President Donald Trump, is serving a term that will last until the end of 2023. “The head of this agency will go at least three or four years into the next president’s term, and the next president might have a completely different conception of consumer financial regulatory issues, yet will be able to do nothing about it,” Kavanaugh said.

Back in 2018 when he was still on the DC Circuit, then Judge Kavanaugh dissented in a CFPB case. In that case, he cited yours truly:

As compared to a single-Director independent agency structure, a multi-member independent agency structure—and its inherent requirement for compromise and consensus—will tend to lead to decisions that are not as extreme, idiosyncratic, or otherwise off the rails. Cf. Stephen M. Bainbridge, Why a Board? Group Decisionmaking in Corporate Governance, 55 Vand. L. Rev. 1, 12-19 (2002).

PHH Corp. v. Consumer Fin. Protec. Bureau, 881 F.3d 75, 184 (D.C. Cir. 2018). It's not clear to me whether the current case will end up tackling the multimember issue. but one hopes so. 

Ann Lipton on WeWork, securities regulation, and capital allocation

Recommended reading.

Sabanes-Oxley Section 404 is still quack corporate governance

I blasted Sarbanes-Oxley Section 404 in both of my books that dealt with the statute:

The Complete Guide To Sarbanes-Oxley: Understanding How Sarbanes-Oxley Affects Your Business

Corporate Governance after the Financial Crisis

A new paper confirms that--over 15 years later--Section 404 is still quackery:

... our results suggest that the costs associated with compliance remain significant and compliance does not appear to be accompanied by reporting benefits in the form of more informative internal control reports or more reliable financial statements.

Go read the whole thing.

It was not shareholder passivity that caused the financial crisis, it was shareholder activism

I cannot believe that a decade after the financial crisis people are still spreading these stories:

In policy circles, the currently prevailing narrative views shareholder engagement as a desirable corporate governance attribute, which is able not only to improve corporate governance and performance, but also to ensure long-term stability and social responsibility. This narrative—also associated with lingering post-global-financial-crisis views that attribute managerial excessive risk-taking and corporate failures to the lack of shareholder engagement and excessive short-termism—found expression in the enactment of the 2010 UK Stewardship Code (revised in 2012 and currently under revision), which aims at making institutional investors serve the whole economy under a long-termism wrapper.

In my book, Corporate Governance after the Financial Crisis, I explain that it was much more likely that shareholder activism that contributed to the financial crisis:

As we have seen, regulators and some commentators identified executive compensation schemes that focused bank managers on short-term returns to shareholders as a causal factor in the financial crisis of 2007-2008. As we have also seen, shareholder activists long have complained that these schemes provide pay without performance. This was one of the corporate governance flaws Dodd-Frank was intended to address, most notably via say on pay.

The trouble, of course, is that shareholders and society do not have the same goals when it comes to executive pay. Society wants managers to be more risk averse. Shareholders want them to be less risk averse. If say on pay and other shareholder empowerment provisions of Dodd-Frank succeed, manager and shareholder interests will be further aligned, which will encourage the former to undertake higher risks in the search for higher returns to shareholders. Accordingly, as Christopher Bruner aptly observed, “the shareholder-empowerment position appears self-contradictory, essentially amounting to the claim that we must give shareholders more power because managers left to the themselves have excessively focused on the shareholders’ interests.”

Senator Warren has a plan for private equity and it stinks

In his latest encomium for Senator Elizabeth Warren, The Economist's Lexington columnist tells us that has a pan for everything. Whether that's a good thing, of course, depends on the merits of the plans.

Senator Warren's most recently announced plan is, as Bloomberg reports, intended "to transform private equity firms, which she said often act like 'vampires' when they buy companies by 'bleeding the company dry and walking away enriched even as the company succumbs.'” [Insert rolling eye emoji here.]

Like everything devised by the mind of Man, private equity is hardly perfect. But it is generally accepted that private equity has a number of advantages that redound to the benefit of investors and the economy as a whole:

Among the advantages of private equity cited by commentators are: (1) better governance and a greater willingness to take risks, (2) the ability to focus on long-term issues and a more stable shareholder base, (3) the ability to attract better management talent, (4) creating a sense of urgency, (5) the ability to use leverage more effectively, (6) avoiding the costs imposed by the Sarbanes-Oxley Act, and (7) freedom from shareholder suits.

Scott J. Davis, Would Changes in the Rules for Director Selection and Liability Help Public Companies Gain Some of Private Equity's Advantages?, 76 U. Chi. L. Rev. 83 (2009).

With some exceptions, moreover, this vampire business is just stuff and nonsense:

Despite the common media characterization and focus on leveraged buy-outs (LBOs) or “rip, strip, and flip” funds,295 private equity provides an investment vehicle that has the ability to inject capital and create value in companies that are otherwise capital-starved in the United States.As an investment vehicle, these funds are entrusted to create stable returns for charitable organizations, universities, and pension funds.

Sarah Sutton Osborne, Carried Away: Sun Capital, Politics, and the Potential for A New Spin on "Trade or Business" in Private Equity, 45 Cumb. L. Rev. 595, 633 (2015).

How does private equity create new wealth?

Private-equity involvement strengthens board monitoring of derivative exposures by reducing board size, improving information flows to the board, increasing board control over managers, sharpening director financial incentives to monitor derivative exposure carefully, and attracting highly qualified, more financially sophisticated directors who are better able to understand the associated risks. It also creates incentives for managers to carefully evaluate risk-return tradeoffs. These strengths could be particularly important for financial firms that have experienced tremendous write-downs of their loan portfolios ....

Large increases in debt also create strong managerial incentives to improve firm efficiency because they: (1) make stock prices much more sensitive to improvements in firm value; and (2) motivate managers to use firm cash conservatively and to eliminate underutilized assets so as to minimize the risk of bankruptcy, financial distress, and the accompanying forced management turnover. Moreover, debtholders and institutional investors can further improve firm risk monitoring since they are large investors who frequently hold both debt and equity positions in private-equity-controlled firms. This gives them good access to and strong incentives to monitor proprietary firm information flows to accomplish this goal. Thus, the shift toward greater private-equity ownership in the economy can be viewed as a value-creating response to increased derivative activity and contract exposure levels, especially in less competitive industries where product market competition is a weaker alternative mechanism for motivating managers to improve firm efficiency and profitability.

Ronald W. Masulis & Randall S. Thomas, Does Private Equity Create Wealth? The Effects of Private Equity and Derivatives on Corporate Governance, 76 U. Chi. L. Rev. 219, 220–21 (2009)

 

Is a bipartisan Jobs Act 3.0 coming?

Bloomberg reports that there is some interest on a bipartisan basis in a Jobs 3.0 bill that would include provisions:

...intended to help companies bring in more capital through initial public offerings and certain investors.

The legislation, for example, would enlarge the group of “accredited investors” who can take part in some unregistered securities offerings, ease startup fundraising involving “angel investors,” and allow all corporations — not just emerging-growth companies — greater freedom to talk to investors and “test the waters” about their potential IPOs.

But there's some stuff missing (granted some of these would be more controversial political):

1. Securities fraud reform.Our expansive securities anti-fraud legal regime poses serious risks to the competitiveness of our markets. Noting that virtually all states now allow corporations to adopt charter provisions limiting director and officer liability and observing that corporate law properly consists of a set of default rules the parties generally should be free to amend, I have proposed allowing corporations to adopt provisions in their articles of incorporation to opt out of derivative litigation and/or securities class actions.
2. Shifting to a more flexible principles-based securities law system from the current rules-based one.
3. Comprehensively reviewing the governance provisions of Sarbanes-Oxley and Dodd-Frank to determine whether there are some that are imposing undue burdens.

See generally Bainbridge, Stephen Mark, Corporate Governance and U.S. Capital Market Competitiveness (October 22, 2010). UCLA School of Law, Law-Econ Research Paper No. 10-13. Available at SSRN: https://ssrn.com/abstract=1696303

What was Elizabeth Warren thinking? Her structure of the CFPB comes back to bite her.

On a party-line vote, the Senate approved Kathy Kraninger for a five-year term as the head of the Consumer Financial Protection Bureau. You will recall, of course, that many of us were critical of the structure of the CFPB, which Senator Warren in her infinite wisdom basically structured so as to be unaccountable to either the President or Congress. That particular decision has now come back to bite her in the proverbial Biblical beast of burden, as Bloomberg Law reports:

Consumer advocates and Democratic lawmakers fear that Kraninger will go farther than periodically skipping funding draws from the Fed. They worry that Kraninger will attempt to enact a proposed Trump administration fiscal 2019 budget that she helped write while she was at the Office of Management and Budget. As the CFPB’s director, Kraninger would be able to enact a proposed $147 million cut, about 23 percent of the the bureau’s budget, on her own and without any input from Congress.

The lesson is never to assume that your acolytes will be in charge permanently.

A Critique of Senator Elizabeth Warren's "Accountable Capitalism Act" (Part 6): The Case Against Codetermination and Employee Involvement

In a WSJ op-ed a few days ago, Senator Elizabeth Warren wrote that:

The Accountable Capitalism Act [that she recently introduced in Congress] ... would give workers a stronger voice in corporate decision-making at large companies. Employees would elect at least 40% of directors. 

In effect, she would mandate a version of codetermination. Early in my career I wrote a series of articles explaining why employee involvement in corporate governance is a fundamentally bad idea:

Employee Involvement in Workplace Governance Post-Collective Bargaining (October 13, 1999). Available at SSRN: https://ssrn.com/abstract=183869

Corporate Decisionmaking and the Moral Rights of Employees: Participatory Management and Natural Law (September 28, 1998). Available at SSRN: https://ssrn.com/abstract=132528

Privately Ordered Participatory Management: An Organizational Failures Analysis (September 1997). Available at SSRN: https://ssrn.com/abstract=38600

Participatory Management within a Theory of the Firm (January 1996). Available at SSRN: https://ssrn.com/abstract=10023

In my (sadly out of print) book Corporation Law and Economics, my analysis of corporate voting rights begins by showing that public corporation decisionmaking must be conducted on a representative rather than participatory basis. It further demonstrates that only one constituency should be allowed to elect the board of directors. It then turns to the question of why shareholders are the chosen constituency, rather than employees. In this blog post, I focus on the latter issue, since that it the key issue raised by Warren's bill. 

The standard law and economics explanation for vesting voting rights in shareholders is that shareholders are the only corporate constituent with a residual, unfixed, ex post claim on corporate assets and earnings.[1]In contrast, the employees’ claim is prior and largely fixed ex ante through agreed‑upon compensation schedules. This distinction has two implications of present import. First, as noted above, employee interests are too parochial to justify board representation. In contrast, shareholders have the strongest economic incentive to care about the size of the residual claim, which means that they have the greatest incentive to elect directors committed to maximizing firm profitability.[2]Second, the nature of the employees’ claim on the firm creates incentives to shirk. Vesting control rights in the employees would increase their incentive to shirk. In turn, the prospect of employee shirking lowers the value of the shareholders’ residual claim.

At this point, it is useful to once again invoke the hypothetical bargain methodology. If the corporation’s various constituencies could bargain over voting rights, to which constituency would they assign those rights? In light of their status as residual claimants and the adverse effects of employee representation, shareholders doubtless would bargain for control rights, so as to ensure a corporate decisionmaking system emphasizing monitoring mechanisms designed to prevent shirking by employees, and employees would be willing to concede such rights to shareholders.

Granted, collective action problems preclude the shareholders from exercising meaningful day-to-day or even year-to-year control over managerial decisions. Unlike the employees’ claim, however, the shareholders’ claim on the corporation is freely transferable. As such, if management fails to maximize the shareholders’ residual claim, an outsider can profit by purchasing a majority of the shares and voting out the incumbent board of directors. Accordingly, vesting the right to vote solely in the hands of the firm’s shareholders is what makes possible the market for corporate control and thus helps to minimize shirking. As the residual claimants, shareholders thus would bargain for sole voting control, in order to ensure that the value of their claim is maximized. In turn, because all corporate constituents have an ex ante interest in minimizing shirking by managers and other agents, the firm’s employees have an incentive to agree to such rules.[3]The employees’ lack of control rights thus can be seen as a way in which they bond their promise not to shirk. Their lack of control rights not only precludes them from double-dipping, but also facilitates disciplining employees who shirk. Accordingly, it is not surprising that the default rules of the standard form contract provided by all corporate statutes vest voting rights solely in the hands of common shareholders.

To be sure, the vote allows shareholders to allocate some risk to prior claimants. If a firm is in financial straits, directors and managers faithful to shareholder interests could protect the value of the shareholders’ residual claim by, for example, financial and/or workforce restructurings that eliminate prior claimants. All of which raises the question of why employees do not get the vote to protect themselves against this risk. The answer is two-fold. First, as we have seen, multiple constituencies are inefficient. Second, as addressed below, employees have significant protections that do not rely on voting.

Suppose a firm behaves opportunistically towards it employees. What protections do the employees have? Some are protected by job mobility. The value of continued dealings with an employer to an employee whose work involves solely general human capital does not depend on the value of the firm because neither the employee nor the firm have an incentive to preserve such an employment relationships. If the employee’s general human capital suffices for him to do his job at Firm A, it presumably would suffice for him to do a similar job at Firm B. Such an employee resembles an independent contractor who can shift from firm to firm at low cost to either employee or employer.[4]Mobility thus may be a sufficient defense against opportunistic conduct with respect to such employees, because they can quit and be replaced without productive loss to either employee or employer. Put another way, because there are no appropriable quasi-rents in this category of employment relationships, rent seeking by management is not a concern.

Corporate employees who make firm-specific investments in human capital arguably need greater protection against employer opportunism, but such protections need not include board representation. Indeed, various specialized governance structures have arisen to protect such workers. Among these are severance pay, grievance procedures, promotion ladders, collective bargaining, and the like.[5]

In contrast, shareholders are poorly positioned to develop the kinds of specialized governance structures that protect employee interests. Unlike employees, whose relationship to the firm is subject to periodic renegotiation, shareholders have an indefinite relationship that is rarely renegotiated, if ever. The dispersed nature of stockownership also makes bilateral negotiation of specialized safeguards difficult. The board of directors thus is an essential governance mechanism for protecting shareholder interests.

If the foregoing analysis is correct, why do we nevertheless sometimes observe employee representation? An explanation consistent with our analysis lies close at hand. In the United States, employee representation on the board is typically found in firms that have undergone concessionary bargaining with unions. Concessionary bargaining, on average, results in increased share values of eight to ten percent.[6]The stock market apparently views union concessions as substantially improving the value of the residual claim, presumably by making firm failure less likely. While the firm’s employees also benefit from a reduction in the firm’s riskiness, they are likely to demand a quid pro quo for their contribution to shareholder wealth. One consideration given by shareholders (through management) may be greater access to information, sometimes through board representation. Put another way, board of director representation is a way of maximizing access to information and bonding its accuracy. The employee representatives will be able to verify that the original information about the firm’s precarious financial situation was accurate. Employee representatives on the board also are well-positioned to determine whether the firm’s prospects have improved sufficiently to justify an attempt to reverse prior concessions through a new round of bargaining.

A Critique of Senator Elizabeth Warren's "Accountable Capitalism Act" (Part 5): Mandatory versus Permissive Corporate Governance Rules

As noted in a prior post, Senator Elizabeth Warren has introduced a bill that would require "corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions. Unlike state non shareholder constituency statutes, which are merely permissive, her bill would mandate such consideration.

As Stefan Padfield has noted:

There should be no doubt that imposing mandatory consideration of stakeholders on directors in carrying out their oversight responsibilities carries meaningful risk of undermining the wealth creation and innovation benefits of the corporate form as currently constituted.This general criticism has been well vetted elsewhere, and I will not rehash the debate here, though my declining to do so should not be construed as my being dismissive of relevant concerns regarding statism.

Stefan J. Padfield, Corporate Social Responsibility & Concession Theory, 6 Wm. & Mary Bus. L. Rev. 1, 32–33 (2015). 

Because shareholder wealth maximization is the right rule, as we discussed in the preceding post, mandating that directors consider non-shareholder interests in making corporate decisions is clearly wrong in and of itself.

There is a broader problem here, however, which is that federal corporate governance rules--such as the quack rules established in SOX and Dodd-Frank (yes, Matt, I stand by the term quack--are almost always mandatory rather than permissive.

In contrast, many rules of state corporate law are enabling rather than mandatory. This is efficient because default rules are preferable to mandatory rules in most settings.[1] So long as the default rule is properly chosen, of course, most parties will be spared the need to reach a private agreement on the issue in question. Default rules in this sense provide cost savings comparable to those provided by standard form contracts, because both can be accepted without the need for costly negotiation. At the same time, however, because the default rule can be modified by contrary agreement, idiosyncratic parties wishing a different rule can be accommodated. Given these advantages, a fairly compelling case ought to be required before we impose a mandatory rule.[2] Mandatory rules are justifiable only if a default rule would demonstrably create significant negative externalities or, perhaps, if one of the contracting parties is demonstrably unable to protect itself through bargaining.

The use of mandatory rules at the federal level is particularly deplorable. If a state adopts an inefficient mandatory rule (see, e.g., much of California corporate law) corporations can respond by reincorporating in a state whose law is more enabling. Obviously, however, few corporations will seriously consider shifting their corporate headquarters to another country to avoid inefficient federal corporate laws. (Having said that, of course, many companies might go private (a.k.a. go dark) in response, as many did in response to SOX and Dodd-Frank.)

Unlike Delaware corporate law, which is typically updated annually to correct errors and improve the law, the federal government rarely revisits mistakes like SOX and Dodd-Frank. So we get stuck with bad federal rules. 

All in all, it's yet another aspect of the bill that makes no sense.

A Critique of Senator Elizabeth Warren's "Accountable Capitalism Act" (Part 4): In Defense of the Shareholder Wealth Maximization Norm

As noted in a prior post, Senator Elizabeth Warren has introduced a bill that would require "corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions.

Sigh.

I have spent most of the last 30 years fighting this idea:

1. In Defense of the Shareholder Wealth Maximization Norm. Washington & Lee Law Review, Vol. 50, 1993. Available at SSRN: https://ssrn.com/abstract=303780
2. The Bishops and the Corporate Stakeholder Debate (April 2002). Villanova Journal of Law and Investment Management. Available at SSRN: https://ssrn.com/abstract=308604
3. Interpreting Nonshareholder Constituency Statutes. Pepperdine Law Review, Vol. 19, Pp. 991-1025, 1992. Available at SSRN: https://ssrn.com/abstract=310261
4. The Shared Interests of Managers and Labor in Corporate Governance: A Comment on Strine (May 10, 2007). UCLA School of Law Research Paper No. 07-15. Available at SSRN: https://ssrn.com/abstract=985683
5. Director versus Shareholder Primacy in New Zealand Company Law as Compared to U.S.A. Corporate Law (March 26, 2014). UCLA School of Law, Law-Econ Research Paper No. 14-05. Available at SSRN: https://ssrn.com/abstract=2416449 
6. Corporate Social Responsibility in the Night Watchman State: A Comment on Strine & Walker (September 9, 2014). UCLA School of Law, Law-Econ Research Paper No. 14-12. Available at SSRN: https://ssrn.com/abstract=2494003

Not to mention countless blog posts. 

So here's just one of many arguments against this nonsense:

In the first place, requiring directors to maximize shareholder wealth provides the board of directors with a determinate metric for making business decisions. I often use the following example to explain what I mean by that: Suppose Acme's board of directors is considering closing an obsolete plant. The board is advised that closing the plant will cost many long-time workers their job and be devastating for the local community. On the other hand, the board's advisors confirm that closing the existing plant will benefit Acme's shareholders, new employees hired to work at a more modern plant to which the work previously performed at the old plant will be transferred, and the local 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 -- close the plant. Once the directors are allowed to deviate from shareholder wealth maximization, however, they must inevitably turn to indeterminate balancing standards. Such standards deprive directors of the critical ability to determine ex ante whether their behavior comports with the law's demands, raising the transaction costs of corporate governance.

Worse yet, absent the clear standard provided by the shareholder wealth maximization norm, the board of directors will be tempted to allow their personal self-interest to dominate their decision making. Put another way, directors who are allowed to consider everybody's interests end up being accountable to no one.

In the plant closing example, if the board's interests favor keeping the plant open, we can expect the board to at least lean in that direction. The plant likely will stay open, with the decision being justified by reference to the impact of a closing on the plant's workers and the local community. In contrast, if the board of directors' interests are served by closing the plant, the plant will likely close, with the decision being justified by concern for the firm's shareholders, creditors, and other benefited constituencies.

Donald J. Boudreaux on Elizabeth Warren's corporate governance bill: "Scary. Deeply, Truly Scary" https://t.co/ta5CTugNTM

— Professor Bainbridge (@ProfBainbridge) August 15, 2018