The ongoing saga at Market Basket focuses clearly the following question: what is the appropriate role of an American corporation in the modern age?

While the shareholders battle and squabble for control and power, various constituencies affected significantly by Market Basket as an entity are in turmoil and suffering: employees, suppliers and customers.

To what degree should the Board of Directors of Market Basket care about the well-being of these constituencies? Clearly Directors want to make decisions which do not harm the bottom line, but that focus might lead to different results from saying: “we are all one big family, what is the best solution for everybody, giving shareholders and customers and employees and suppliers and creditors an equal weight?”

This first of three blogs will touch briefly on the history of American corporations. A second blog will discuss the current mantra of maximizing “shareholder value.” A third blog will discuss a new form of entity, the so-called “public-benefit corporation.”

Corporations as an idea began as a grant by a government of a charter to a company which was charged with an obligation of doing public good. Original corporate charters were given to railroads, canal builders and the like.

In the 1970s and 1980s, there was a shift in thinking about the role of corporations. Corporations were no longer viewed as stable entities providing long term income and retirement for employees, and providing a fundamental benefit to the cities and societies where they were located. In the face of heightening economic competition and in the fear that American corporations would be left by the wayside, a new view of corporations as purely economic entities found its way from academia into corporate America. The corporation, it was so asserted, was designed only to make money for the shareholders who undertook risk. You could measure the value of a corporation, and how well it was run, by a bottom line which was easily quantifiable. CEOs were to run companies for profit. Boards were to make decisions, and select CEOs, with the same goal in mind.

The price of your share of stock became the bottom line mantra. Never mind that thereafter some academicians pointed out that actual increases in shareholder value were higher in the period prior to this new focus on economic performance.

Today, it is common wisdom that boards and CEOs are to run companies for the benefit of their shareholders. Failure to do so gets you sued in shareholder derivative actions. To the extent that corporations now undertake programs of “social responsibility” these programs, as admirable as the may be, are often seen primarily as public relations efforts. One commentator describes this development (not wholly properly) as merely a “moral defense” of capitalism.

My next blog post will discuss certain structural elements of our legal and regulatory system which support the concept that corporations cannot be understood separate and apart from their mission to maximize shareholder return.