Kobi Kastiel

Lecturer on Law

Fall 2021


Kobi Kastiel is an Assistant Professor at Tel Aviv University, Faculty of Law. He also serves as a Senior Fellow at the Harvard Law School Program on Corporate Governance. Kastiel teaches and researches in the fields of corporate law and corporate governance, with a particular focus on public companies with controlling shareholders, and shareholder activism. He earned his S.J.D. and LL.M. from Harvard Law School, where he also served as a John M. Olin Fellow in Law and Economics and was awarded the John M. Olin Prize in Law & Economics and the Victor Brudney Prize for Corporate Governance. Kastiel also holds an LL.B. degree (magna cum laude) from Tel Aviv University. Prior to joining Tel-Aviv University, he was a Research Director at the Harvard Law School Program on Corporate Governance, and a Co-Editor of the Harvard Law School Forum on Corporate Governance and Financial Regulation. He also practiced for four years in the corporate group of a top New York law firm, and clerked on the Israeli Supreme Court.

Lucian A. Bebchuk, Kobi Kastiel & Roberto Tallarita, For Whom Corporate Leaders Bargain (Aug. 19, 2020).
Corporate Law & Securities
Corporate Governance
Corporate Law
Mergers & Acquisitions
Securities Law & Regulation
Type: Other
At the center of a fundamental and heated debate about the purpose that corporations should serve, an increasingly influential “stakeholderism” view advocates giving corporate leaders the discretionary power to serve all stakeholders and not just shareholders. Supporters of stakeholderism argue that its application would address growing concerns about the impact of corporations on society and the environment. By contrast, critics of stakeholderism object that corporate leaders should not be expected to use expanded discretion to benefit stakeholders. This Article presents novel empirical evidence that can contribute to resolving this key debate. During the hostile takeover era of the 1980s, stakeholderist arguments contributed to the adoption of constituency statutes by more than thirty states. These statutes authorize corporate leaders to give weight to stakeholder interests when considering a sale of their company. We study how corporate leaders in fact used the power awarded to them by these statutes in the past two decades. In particular, using hand-collected data, we analyze in detail more than a hundred cases governed by constituency statutes in which corporate leaders negotiated a sale of their company to a private equity buyer. We find that corporate leaders have used their bargaining power to obtain gains for shareholders, executives, and directors. However, despite the risks that private equity acquisitions posed for stakeholders, corporate leaders made very little use of their power to negotiate for stakeholder protections. Furthermore, in cases in which some protections were included, they were practically inconsequential or cosmetic. We conclude that constituency statutes failed to deliver the benefits to stakeholders that they were supposed to produce. Beyond their implications for the long-standing debate on constituency statutes, our findings also provide important lessons for the ongoing debate on stakeholderism. At a minimum, stakeholderists should identify the causes for the failure of constituency statutes and examine whether the adoption of their proposals would not suffer a similar fate. After examining several possible explanations for the failure of constituency statutes, we conclude that the most plausible explanation is that corporate leaders have incentives not to protect stakeholders beyond what would serve shareholder value. The evidence we present indicates that stakeholderism should be expected to fail to deliver, as have constituency statutes. Stakeholderism therefore should not be supported, even by those who deeply care about stakeholders. This paper is part of a larger research project of the Harvard Law School Corporate Governance on stakeholder capitalism and stakeholderism. Another part of this research project is The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita.

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