Corporate Decision-Making, Net Present Value, and the Environment

Bryan R. Routledge

in The Oxford Handbook of Business and the Natural Environment

Published in print November 2011 | ISBN: 9780199584451
Published online January 2012 | | DOI:

Series: Oxford Handbooks in Business and Management

Corporate Decision-Making, Net Present Value, and the Environment

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This article presents some background on shareholder unanimity and governance in general and specific to issues related to environmental impact. It offers a simple example to show how and why the Net Present Value (NPV) rule works. It then takes a look at how things might work—and the vast sea of open questions—in the corporate governance of voting, corporate control, and manager-shareholder agency. The NPV rule is a central foundation of finance and modern corporations. The “simple” solution to public good and externality is regulation that has the effect of adjusting cash flows to reflect properly the social value. Most corporations have in place a voting mechanism that is one-share one-vote with a majority rule. CEO preferences are not observed and must be elicited in an interview or through some self-selection mechanism. A direct way to confront corporations with environmental concerns is with their cash flow implications.

Keywords: shareholder unanimity; corporate governance; Net Present Value; voting; corporate control; cash flow; manager-shareholder agency

Article.  7562 words. 

Subjects: Business and Management ; Business Strategy

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