Paper Abstract
1088. Lucian Bebchuk, Kobi Kastiel & Roberto Tallarita, Stakeholder Capitalism in the Time of COVID, 12/2022; forthcoming in Yale Journal on Regulation, Vol. 40 (2023).
Abstract: This Article empirically investigates how corporate stakeholders were treated in corporate acquisitions during the COVID pandemic. The pandemic followed and was accompanied by peak support for, and broad expressions of commitment to, stakeholderism from corporate leaders. Nonetheless, and even though the pandemic heightened risks to stakeholders, we document that corporate leaders negotiating deal terms failed to look after stakeholder interests.
We conduct a detailed examination of the 122 $1B+ acquisitions of public companies (with an aggregate consideration exceeding $800 billion) that were announced during the first two years of the pandemic. We find that deal terms provided large gains for shareholders of acquired companies, as well as substantial private benefits for corporate leaders. However, although many transactions were viewed at the time of the deal as posing significant post-deal risks for employees, corporate leaders largely did not obtain any employee protections. Similarly, corporate leaders failed to negotiate for protections for customers, suppliers, communities, the environment, and other stakeholders.
Overall, our findings have significant implications for long-standing debates on the corporate treatment of stakeholders. In particular, our findings are inconsistent with the implicit-promises/team-production view that corporate leaders of an acquired company should and do look after stakeholder interests. Our work also supports the agency critique of stakeholder capitalism which suggests that, due to their incentives, corporate leaders cannot be relied upon to look after stakeholder interests and to live up to pro-stakeholder rhetoric.