Does shareholder primacy lead to a decline in managerial accountability?

Shareholder primacy is increasingly considered to be the most effective way to foster managerial (corporate) accountability. Contrary to this now standard argument, we consider that shareholder primacy, rather than gatekeeper failure, is directly responsible for the multiplication of accounting irregularities and the dramatic increase in executive compensations. To defend this thesis, we propose a new reading of Berle and Means (1932), Galbraith (1973) and Alchian and Demsetz (1972), stressing the logical failure of a control of the business firm provided for by stock markets: the implementation of shareholder primacy implies a partial disconnection between access to internal knowledge and empowerment. In turn, this disconnection favours deceptive behaviours on the part of corporate insiders. Empirical evidence mostly based on Enron-era financial scandals illustrates our argument.