Director primacy

Director Primacy is a theory of the firm that was introduced by Stephen M Bainbridge (Professor - UCLA School of Law) in an article in Northwestern University Law Review in 2003 Vol 97 No 2.

He argues that traditional firm theory is based on a false premise that the board's authority derives from the owners. He argues that while the board is appointed by the owners, the nature of the appointment is one in which the power to be exercised is not under the control of the appointing members. Once appointed then, directors are almost unfettered in their exercise of their powers. However, they are subject to overarching fiduciary responsibility which aligns their required actions with a shareholder wealth maximization principle.