The Shareholder Welfare Maximization Corpgov model. Can it work?

Oliver Hart and Luigi Zingales, (Harvard and Chicago) have just published an article (1) in which they promote the idea that Shareholder Value Maximization should be substituted by Shareholder Welfare Maximization as a corporate goal entailing fiduciary duties.

Their first point is examining the case for Shareholder Value Maximization: in a perfectly competitive market, an increase in the value of a firm favors shareholders whose budget restraint moves upwards, without altering other agents´ welfare as prices are not affected; so shareholders necessarily support the SVM model; the same appears to be the case if we consider the firm as a set of contracts that insulate contractors from production decisions: if a change is decided that increases shareholders´value, no stakeholder is negatively affected. Shareholders´value is the total and unique contribution of the firm to society, that is, if it dissappears, this is the value of all welfare lost.

The problems with SVM for Hart & Zingales. They see three major problems: