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PHL 295 - Stakeholder Capitalism 2

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Joseph Heath

Short and long answer exam Spend time explaining and less time writing out an argument Law and contract act as though they are the invisible hand within the corporation Shareholder theory eliminates the need of an invisible hand. The BP oil spill reduced the regulatory effectiveness by throwing parties for the regulators. The oil heads that they put on to save money would have been seen as morally correct for the corporation for freeman. There is a large difference between the small family owned business who should benefit from the business. Whereas within major corporations the owners are not the original owners and take no responsibility for the company. Nexus of contract view - just a bunch of people making contracts Arguing that the way in which the law organizes the firm to handle the way that everyone has something at stake. Entity view of the firm that the company is a real thing and it is an autonomous institution. That is by design in order to protect everyone from each other. Mediating hierarchy. Managers are fiduciaries for the firm not investors Everyone has a stake Workers make firm specific investments of human capital over time a workers outside options dwindle Another prisoners dilemma: training vs hard-working Solution: pay younger employees less, older employees more You get stuck with firm specific capital with aspirations of earning money later on. On
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