Abstract: This article analyzes the conflict of interests between shareholders and
other stakeholders, including when such conflicts of interests may arise. It is argued
that shareholder value cannot be justified simply by referring to any prerogative
property rights of the shareholders. Instead, shareholder value coincides with the
efficient hypothetical perfect contract. However, due to contractual failures in certain
bargain situations, management may be unable to "internalize the firms externalities".
This means that in these situations there is a tradeoff between a broad duty of loyalty
for management in listed firms and other traditional remedies. The theoretical insights
are applied on a case from the Danish Supreme Court (Louis Poulsen A/S) where the
interests of the stakeholders were decisive. However, it is shown that the verdict may
instead harm the relevant stakeholders illustrating how cautious the legal system
should use a doctrine based on the "company’s interests". In addition, the notion of a
firm’s social responsibility is critically evaluated together with the associated pitfalls
of accepting this concept.