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An increasing number of firms make reference to the pursuit of environmental and social goals in the definition of their purpose. This raises important issues with respect to the way in which the trade-offs between profit maximization and social value should be solved. As I show in this chapter, there are different perspectives that can be adopted to this end depending on the field of scholarship selected: economics, finance, management and law. Each perspective offers different nuances as to the way in which corporate purpose is defined and the conflict between the pursuit of profit and social value is dealt with. In Sect. 4.2 of this chapter, I argue that a broader concept of corporate purpose has gradually emerged over the years in economics, finance and management studies, as a result of various approaches to corporations such as corporate social responsibility (CSR) and stakeholder theory, which have been gradually integrated into the corporate governance framework. Environmental and social sustainability has come to characterize most of the instances of CSR and some core aspects of stakeholder governance, without discarding the pursuit of corporate profits as a long-term goal of the corporation. At the start of this century, sustainability concerns have entered into the area of finance studies through the theory of “enlightened shareholder value” (ESV) and its homologues like “shared value”. In Sect. 4.3 I argue, from a comparative law perspective, that corporate purpose has been variously defined in different jurisdictions, while European laws often consider the company’s interest rather than corporate purpose. However, corporate purpose is generally identified in practice with the pursuit of corporate profits, albeit with variations concerning the relevance of given stakeholders and social values in corporate governance. In general, legal definitions of corporate purpose are flexible and allow for different types of solution of the conflict between economic value and social value at firm level and within a given system. In Sect. 4.4 I critically analyse recent economics and management studies which argue that corporate purpose should be modified to reflect the prevalence of social value over shareholder value, and that the latter should be pursued by managers only derivatively, as a result of pro-stakeholders actions directed to increase the “total pie”. I object to this recent trend from a law and finance perspective and show my preference for keeping the relevant discussion within the confines of ESV theory. However, I admit that corporate purpose should be larger than profit from a behavioural perspective if we want to motivate people to perform outstandingly and sustainably in organizations. In Sect. 4.5, I emphasize the mounting role of regulatory and ethical constraints to business conduct deriving from sustainability concerns. These constraints go beyond the mere calculus required by ESV, which asks management to pursue stakeholder interests only to the extent that this increases the long-term value of the firm. Indeed, ethical considerations as reflected by international standards and consolidated best practices should apply to the running of businesses without necessarily requiring a prior analysis of their precise impact on financial performance.
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Fish, J., & Davidoff Solomon, S., “Should Corporations Have a Purpose?”, ECGI Law Working Paper 510/2020, https://ecgi.global/working-paper/should-corporations-have-purpose, 3, define it as “the hottest topic in corporate governance”.
Rock, E. “For Whom Is the Corporation Managed in 2020: The Debate over Corporate Purpose”, ECGI Law Working Paper 515/2020, https://ecgi.global/working-paper/whom-corporation-managed-2020-debate-over-corporate-purpose.
J. Fish and S. Davidoff Solomon, note 1.
Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution, https://www.weforum.org/agenda/2019/12/davos-manifesto-2020-the-universal-purpose-of-a-company-in-the-fourth-industrial-revolution. The Manifesto adds inter alia that companies should pay their fair share of taxes, show zero tolerance for corruption, uphold human rights throughout their global supply chains and advocate for a competitive level playing field.
Why we need the ‘Davos Manifesto’ for a better kind of capitalism https://www.weforum.org/agenda/2019/12/why-we-need-the-davos-manifesto-for-better-kind-of-capitalism/.
See the BRT’s Statement on the Purpose of a Corporation, at https://opportunity.businessroundtable.org/ourcommitment/. The CEOs of large corporations who subscribed to it committed to delivering value to their customers; investing in their employees; dealing fairly and ethically with their suppliers; supporting the communities in which they work; respecting the people in their communities and protect the environment by embracing sustainable practices across their businesses; generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. They also committed to transparency and effective engagement with shareholders, concluding: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country”.
Martin Lipton et al., The New Paradigm: A Roadmap for an Implicit Corporate governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, 2 September 2016, International Business Council of the World Economic Forum, downloadable at https://www.wlrk.com/webdocs/wlrknew/AttorneyPubs/WLRK.25960.16.pdf.
In a revised version of his paper, Lipton approvingly cited the British Academy project on the Future of the Corporation, led by Professor Colin Mayer whose proposals I critically discuss in sec. IV: Lipton et al., It’s Time to Adopt the New Paradigm, a 2019 blog post of the Harvard Law School Forum on Corporate governance and Financial Regulation, https://corpgov.law.harvard.edu/2019/02/11/its-time-to-adopt-the-new-paradigm/. However, Lipton criticizes Mayer’s proposals to the extent that they require legislation. In his opinion, “no legislation or regulation is necessary to implement The New Paradigm. Corporations, asset managers, and institutional investors can unilaterally announce their acceptance of and adherence to the principles of The New Paradigm. Consistent with observations made by Chief Justice Leo Strine of the Supreme Court of Delaware, in his 2017 Yale Law Journal article, “Who Bleeds When the Wolves Bite?: A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate governance System”, from both a corporate law and a trust law standpoint the principles of The New Paradigm are intended to achieve long-term growth in value while eschewing actions and policies that threaten future growth and value, or the franchise itself. Adoption of and adherence to the principles of The New Paradigm is consistent with the fiduciary duties of boards of directors to their corporations and shareholders, and of asset managers to investors and the underlying beneficiaries for whom they are acting”. Lipton also endorsed the statements on corporate purpose by several index fund managers, including Larry Finck, the CEO of Blackrock, the world’s largest asset manager, who in his 2018 letter to CEOs noted: “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
See, for a definition of these concepts, Enacting Purpose Initiative, Enacting Purpose within the Modern Corporation. A Framework for Boards of Directors, 2020, 12 ff., https://www.enactingpurpose.org/assets/enacting-purpose-initiative---eu-report-august-2020.pdf.
See https://www.danone.com/about-danone/sustainable-value-creation.html, where the corporate purpose is defined under the heading “creating and sharing sustainable value”, as follows: “Through our commitment to social and economic progress, and our passion for bringing health through food to as many people as possible, we aim to generate profitable, sustainable growth now and for many years to come”. See also https://www.danone.com/about-danone/sustainable-value-creation/our-unique-growth-model.html, where it is stated: “In an purpose increasingly volatile and complex environment, Danone strives to strengthen its model of growth through disciplined resource allocation, efficiency gains and cost optimization with a permanent balance in managing the short, mid and long-term horizons. The company therefore favours strategic growth opportunities that create long-term value over tactical short-term allocations”.
See https://www.danone.com/about-danone/sustainable-value-creation/BCorpAmbition.html, where it is specified: “Since 2015, Danone has partnered with B Lab to help define a meaningful and manageable path to certification for multinationals and publicly traded companies, as well as accelerate growth of the B Corp movement into the mainstream”.
See https://www.enel.com/company/about-us/vision, where the following is added: “In line with our Open Power strategic approach, Enel has placed environmental, social and economic sustainability at the centre of its corporate culture and is implementing a sustainable development system that is based on the creation of shared value, both inside and outside of the company …”.
See the note ‘Governing Through the Pandemic’ posted by D. McCormack and R. Lamm, Deloitte LLP, on June 24, 2020, on the Harvard Law School Forum on Corporate governance, at https://corpgov.law.harvard.edu/2020/06/24/governing-through-the-pandemic/.
Criticism has been raised towards companies that have cut jobs rather than dividends and share buy-backs: see A. Scott, R. Kerber, J. DiNapoli, R. Spalding, ‘U.S. companies criticized for cutting jobs rather than investor payouts’, Reuters, Business News, April 8, 2020, who argue: “While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain. Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials”.
See ‘Governing Through the Pandemic’, note 19.
See The FT View, “Companies should shift from ‘just in time’ to ‘just in case’. Pandemic has shown that businesses neglected vital safety margins”, 22 April 2020, at https://www.ft.com/content/606d1460-83c6-11ea-b555-37a289098206?shareType=nongift. The COVID-19 outbreak has exposed the thin margins on which much of global business was run: “Highly indebted companies, working from lean inventory, supported by just-in-time supply chains and staffed by short-term contractors, have borne the brunt of the sudden blow. They will now suffer the rolling, longer-term impact of its unpredictable consequences. Too late, many executives and owners have realised that by pursuing the holy grail of ever greater efficiency, they sacrificed robustness, resilience and effectiveness. In many cases, they will turn out to have sacrificed the business itself”.
See Pinner, D., Rogers, M., & Samandari, H. “Addressing Climate Change in a Post-pandemic World”. McKinsey Quarterly, April 7, 2020, https://www.mckinsey.com/business-functions/sustainability/our-insights/addressing-climate-change-in-a-post-pandemic-world#.
See FT View, note 23, citing N. Taleb, Antifragile: How to Live in a World We Don’t Understand, Allen Lane, 2012.
Friedman, M., Capitalism and Freedom, University of Chicago Press, 1962, 112.
See Cheffins, B., “Stop Blaming Milton Friedman!”, University of Cambridge Faculty of Law Legal Studies Research Paper Series, Paper N. 9/2020, March 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3552950.
Friedman, M. The Social Responsibility of Business is to Increase its Profits, The New York Times Sunday Magazine, September 13, 1970, 32.
See B. Cheffins, note 65.
See Davis, G., Managed by the Markets, How Finance Reshaped America, Oxford University Press, 2009, 50 ff.
Holmstrom, B., & Kaplan, S. (2003). “The State of U.S. Corporate Governance: What’s Right and What’s Wrong?” Journal of Applied Corporate Finance, 15(3), 10.
Ibidem. For example, in 1980 only 20% of the compensation of U.S. CEOs was tied to stock market performance. Long-term performance plans were widely used, but they were typically based on accounting measures like sales growth and earnings per share that tied managerial incentives less directly, and sometimes not at all, to shareholder value.
See M. Friedman, note 66, using an expression already found in his book Capitalism and Freedom, note 64, 113.
Smith, N. (2003). “Corporate Social Responsibility: Whether or How?” California Management Review, 45, 52.
See World Economic Forum, Responding to the Challenge: Findings of a CEO Survey on Global Corporate Citizenship, cited by N. Smith, note 75.
See Smith, N., & Lenssen, G. (2009) “Mainstreaming Corporate Responsibility: An Introduction”, in N. Smith and G. Lenssen (eds.), Mainstreaming Corporate Responsibility, Wiley, 2, who argue: “The business case at the level of the firm is becoming increasingly clear as more companies come to understand that, aside from any moral obligation, it is in their economic interest to address environmental, social and governance issues and in a manner that is integrated with strategy and operations”.
See Crane, A., Matten, D., & Spence, L. (2008). “Corporate Social Responsibility in a Global Context”, in A. Crane, D. Matten and L. Spence (eds.), Corporate Social Responsibility. Readings and Cases in a Global Context, Routledge, 3 ff., where current definitions of CSR and analysis of its core characteristics.
N. Smith and G. Lenssen, note 78, 2, also noting that the case for business to engage in ESG issues is based on the realization that a new global social contract between business, government and society is needed.
See Pettigrew, A., “Corporate Responsibility in Strategy”, in N. Smith and G. Lenssen (eds.), note 76, 12.
See Benabou, R., & Tirole, J. (2010). “Individual and Corporate Social Responsibility”. Econometrica, 77, 1, and the other works cited by Ferrell, A., Liang, H., & Renneboog, L. (2016). “Socially Responsible Firms”. Journal of Financial Economics, 122, 585.
See Krueger. (2015). “Corporate Goodness and Shareholder Wealth”. Journal of Financial Economics 115, 304.
See A. Ferrell, H. Liang and L. Renneboog, note 92, 586.
Ibidem, for a review of the relevant works.
See Freeman, R.E., Harrison, J., Wicks, A., Parmar, B., & De Colle, S. (2010). Stakeholder Theory. The State of the Art, Cambridge University Press, 4.
Freeman, R.E. (1984). Strategic Management. A Stakeholder Approach, Pitman.
R.E. Freeman et al., note 48, 4.
Ibidem, 242, with reference to Wood, D. (1991). “Corporate Social Performance Revisited”. Academy of Management Review, 16, 691.
R.E. Freeman et al., note 48, 242.
Jensen, M. (2010). “Value Maximization, Stakeholder Theory, and the Corporate Objective Function”. Journal of Applied Corporate Finance, 22, 32, and (2002) Business Ethics Quarterly, 12, 235 (from which I quote).
Ibidem, 239, where it is also specified: “When monopolies or externalities exist, the value-maximizing criterion does not maximize social welfare.”
Porter, M., & Kramer, M. (2011). “Creating Shared Value: How to Reinvent Capitalism—And Unleash a Wave of Innovation and Growth”. Harvard Business Review, 3.
Ibidem, 7. See the example of Danone referred to in para. 3 above.
Hart, O., & Zingales, L. (2017). “Companies Should Maximize Shareholder Welfare Not Market Value”. Journal of Law, Finance, and Accounting, 247.
Ibidem, 251, quoting approvingly two legal works in particular: Elhauge, E. (2005). “Sacrificing Corporate Profits in the Public Interest”. New York University Law Review, 80, 733; Stout, L., & Stout, L. (2012). The Shareholder Value Myth. San Francisco: BK Publishers.
Rock, note 2, at 18, makes the following comment on Hart and Zingales paper: “Whether, overall, it would make sense as a matter of corporate governance to embrace the ‘shareholder welfare’ objective in place of a ‘shareholder value’ objective is a real world question that their interesting model does not resolve”.
Hart and Zingales, note 94, 271.
See Holger Fleischer, “Gesetzliche Unternehmenszielbestimmungen im Aktienrecht – Eine vergleichende Bestandsaufnahme”, in ZGR, 46, p. 411. I cite from the Italian version of this paper, “La definizione normativa dello scopo dell’impresa azionaria: un inventario comparato”, in Rivista delle Società, 2018, 803.
Ibidem, at 806.
Sec. 76 (1) of the German Corporate Law.
Fleischer, note 15, 806.
See the seminal paper by P. Mülbert, “Shareholder Value aus rechtlicher Sicht”, 26 Zeitschrift für Unternehmens- und Gesellschaftsrecht (2009) 2, 129.
Fleischer, note 15, 808. See Para. 4.1.1 of the German Code of Corporate governance 2002, convenience translation, which stated: ‘The Management Board is responsible for independently managing the enterprise. In doing so, it is obliged to act in the enterprise’s best interests and undertakes to increase the sustainable value of the enterprise’.
See Para. 4.1.1 of the German Corporate Governance Code 2009, convenience translation, at https://www.dcgk.de/files/dcgk/usercontent/en/download/code/D_CorGov_final_2009.pdf, stating: ‘The Management Board is responsible for independently managing the enterprise with the objective of sustainable creation of value and in the interest of the enterprise, thus taking into account the interests of the shareholders, its employees and other stakeholders’.
See Para. 4.1.1 of the German Corporate Governance Code 2017, convenience translation, at https://www.dcgk.de/files/dcgk/usercontent/en/download/code/170214_Code.pdf, stating: ‘The Management Board assumes full responsibility for managing the company in the best interests of the company, meaning that it considers the needs of the shareholders, the employees and other stakeholders, with the objective of sustainable value creation.’
See German Corporate Governance Code 2019, convenience translation, at https://www.dcgk.de//files/dcgk/usercontent/en/download/code/191216_German_Corporate_Governance_Code.pdf.
See the Law No. 019-486 of 22 May 2019 concerning the growth and transformation of enterprises, known as Loi PACTE.
See Pietrancosta, A. (2019) “‘Intérêt social’ and ‘raison d’être’: Thoughts About Two Core Provisions of the Business Growth and Transformation Action Plan (PACTE) Act That Amend Corporate Law”. In Réalités Industrielles, November 2 (I quote from an English translation which was kindly provided to me by the author).
See P. Conac, “Le nouvel article 1833 du Code Civil Français et l’integration de l’intérêt social et de la responsabilité social d’entreprise: constat ou revolution?”, in Orizzonti del diritto commerciale, 3, 2019, 500, available at http://www.rivistaodc.eu/HomePage.
See S. Schiller, ‘L’évolution du röle de sociétés depuis la Loi PACTE’, in Orizzonti del diritto commerciale, note 28, 525.
See I. Urbain Parleani, ‘L’article 1835 et la raison d’être’, in Orizzonti del diritto commerciale, note 28, 533, at 542.
See A. Mignoli, ‘L’interesse sociale’, in Rivista delle società, 1958, 725; P.G. Jaeger, L’interesse sociale, Giuffrè, 1964; on the evolution of legal scholarship in this area, see the collective volume L’interesse sociale tra valorizzazione del capitale e protezione degli stakeholders. In ricordo di Pier Giusto Jaeger, Giuffrè 2010.
See L. Enriques, Il Conflitto d’interessi degli amministratori di società per azioni, Giuffrè, 2000, 173; U. Tombari, “Potere” e “interessi” nella grande impresa azionaria, Giuffrè Francis Lefebvre, 2019, 62.
See Ferrarini, G. (2003). “Shareholder Value and the Modernization of European Corporate Law”, in K. Hopt and E. Wymeersch (eds.), Capital Markets and Company Law, Oxford University Press, 230. For a radical criticism of this and other concepts of modern corporate law, see G. Rossi, Il conflitto epidemico, Adelphi edizioni, 2003, 47 and 71.
See L. Enriques, note 33, 162, n. 64.
See the discussion by M. Libertini, in Orizzonti del diritto commerciale, note 28, 602; U. Tombari, “Potere” e “interessi” nella grande impresa azionaria, Giuffrè Francis Lefebvre, 2019, 30 ff.
See M. Libertini, ‘Un commento al manifesto sulla responsabilità sociale dell’impresa della Business Roundtable, in Orizzonti del diritto commerciale, note 28, 627, at 633.
See the discussion by U. Tombari, in Orizzonti del diritto commerciale, note 28, 627, at 633. See however, for critical remarks, F. Denozza, ‘Lo scopo della società: dall’organizzazione al mercato’, ibidem, 615, at 617.
See Gower & Davies. (2012). Principles of Modern Company Law, 9th ed. by P. Davies and S. Worthington, Sweet & Maxwell, 540.
See DTI, Company Law Reform, 2005, 20.
J. Fish and S. Davidoff Solomon, note 1.
204 Mich. 459 (MI 1919).
See L. Stout, note 75, 27.
Ibidem, 26 arguing that the court’s statements on corporate purpose are to be seen as a dictum.
506 A.2d 173 (Del. 1985), 182.
J. Fish and S. Davidoff Solomon, note 40, 120, who argue that the rationale behind Revlon and other Delaware takeover cases was regulating inherent conflicts of interest and therefore managerial loyalty, rather than shareholder primacy, citing Z. Gubler, What’s the Deal with Revlon? (working paper, draft dated Feb. 24, 2020) to this effect.
E. Rock, note 2, 9.
Ibidem, 8, referring to e-Bay Domestic Holdings, Inc. v. Newmark, 16 A.3rd 1, 34 (Del. Ch. 2010).
See L. Stout, note 75, 32.
Rock, note 2, 13. For the e-Bay case, see note 124.
See the works by C. Mayer and A. Edmans discussed below at para. 9.1. and 9.2.
See Hopt, K. (1996). “Labour Representation on Corporate Boards: Impacts and Problems for Corporate Governance and Economic Integration in Europe”. In R. Buxbaum et al. (eds.), European Economic and Business Law. Berlin and New York, 269.
See G. Ferrarini, note 103, 230 ff.
See Becht, M., Bolton, P., & Roell, A. “Corporate Governance and Control”, ECGI Finance Working Paper 02/2002, arguing that corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders.
See M. Jensen, note 56, 8.
See Harper Ho, V. (2010). “Enlightened Shareholder Value: Corporate Governance Beyond the Shareholder-Stakeholder Divide”. Journal of Corporation Law, 36, 59.
See Ferrarini, note 103, 232 ff.
See Davies, P. “Shareholder Value, Company Law, and Securities Markets Law”. In Hopt and Wymeersch (eds.), note 19, 261 ff.
Mayer, C. (2018). Prosperity. Better Business Makes the Greater Good. Oxford University Press.
Ferrarini, G. (2020). “An Alternative View of Corporate Purpose: Colin Mayer on Prosperity”. Rivista delle società, 1, 27 (downloadable as a working paper at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3552156).
Mayer thinks of the corporation as an institution: “the law recognizes that the corporation is a legal personality distinct from its shareholders” (Prosperity, …). However, in his theory relations play a decisive role.
The benefit corporation has a stated public purpose alongside its commercial objectives, which are enshrined in its charter. Moreover, directors have a fiduciary duty to uphold those public purposes and “if they fail to do so then shareholders can seek injunctive relief to prevent them abusing the corporation’s purposes” (p. 42).
See Hansmann, H., & Kraakman, R. (2001). “The End of History for Corporate Law”. Georgetown Law Journal, 89, 439.
Blair, M., & Stout, L. (1999). “A Team Production Theory of Corporate Law”. Vanderbilt L. R. 85, 247. The two authors started from the premise that the central problem to be solved in organizing production activities in corporations is a ‘team production’ problem, which typically occurs when several types of resources are used, the product is not the sum of separable outputs of each cooperating source, and not all resources used in the team production belong to one person. Some economists have suggested that one solution to the team production problem is to give final authority over the allocation of the output to an outsider to the team. Blair and Stout argue that this governance arrangement fits the role that the law assigns to boards of directors in corporations. Indeed, corporate law requires that many of the most conflicted and contentious decisions about corporate policy must be made by the board of directors and in some cases by a subset of directors who form a committee of disinterested directors. See also Blair, M. (2015). “Boards of Directors and Corporate Performance Under a Team Production Model”, in J. Hill and Randall Thomas (eds.), Research Handbook on Shareholder Power. Elgar, 249, at 257.
Mayer, note …, 109. He also argues that companies exist to do things, not simply to make profits: ‘The purpose of companies is to produce solutions to problems of people and planet and in the process to produce profits, but profits are not per se the purpose of companies’.
For a strong criticism of this type of solution from a legal perspective, see Ventoruzzo, M. (2020). “Brief Remarks on ‘Prosperity’ by Colin Mayer and the Often Misunderstood Notion of Corporate purpose”. Rivista delle società, 1, 43, at 46.
The importance of corporate law is, however, declining as a result of the rise of institutional investors: see Goshen, Z., & Hannes, S. The Death of Corporate Law, ECGI Law Working Paper N° 402/2018 May 2018, arguing that the more competent shareholders become, the less important corporate law will be. Increases in shareholder competence reduce management agency costs, intensify market actors’ preference for private ordering outside of courts, ultimately driving corporate law into oblivion.
The former is well exemplified by Friedmann, M. “The Social Responsibility of Business Is to Increase its Profits”, The New York Times Magazine, September 13, 1970; the latter by Freeman, R. (2010). Strategic Management: A Stakeholder Approach, 2nd ed. Cambridge University Press.
Edmans, A. (2020). Grow the Pie. How Great Companies Deliver Both Purpose and Profit. Cambridge University Press.
Ibidem, arguing that “what matters is not only how much money suppliers receive, but how promptly they’re paid”.
Ibidem, 23, noting that from 1990 until the mid-2010s, UK banks sold payment protection insurance to customers who took out mortgages, loans and credit cards. This insurance had the potential to create value by repaying customers’ debts if they lost their jobs or became ill, but it was mis-sold.
Ibidem, 43: “By trying to be everything to everybody, a pie-growing enterprise can end up being nothing to nobody”.
Ibidem, 47, noting that “Maximize shareholder value is a futile objective, since you can’t predict how most actions will affect long-term shareholder value”.
Ibidem, arguing that “Across all investors, 2,372, representing $86.3 trillion of assets, had signed the UN Principles for Responsible Investment – a commitment to incorporate environmental, social and governance (ESG) issues into investment decisions – by March 2019. That’s substantially higher than the 63 investors and $6.5 trillion of assets when the principles were founded in 2006”.
Rebecca Henderson, Reimagining Capitalism. How Business Can Save the World, Penguin Business, 2020.
Henderson, note 166, 49.
See D. Pink, Drive, Canongate, 2009, 85 ff.
See. M. Csikszentmihalyi, Flow. The Psychology of Optimal Experience, HarperCollins, 1990, 218.
Pink, note 187, 134.
See G. Hamel, The Future of Management, Harvard Business Review Press, 2007, 76.
L. Bebchuk and R. Tallarita, ‘The Illusory Promise of Stakeholder Governance’ (February 26, 2020), forthcoming, Cornell Law Review, December 2020, available at https:/ssrn.com/abstract = 3544978. See also, in a similar direction, Matteo Gatti and Chrystin Ondersma, ‘Can a Broader Corporate purpose Redress Inequality? The Stakeholder Approach Chimera’ forthcoming The Journal of Corporation Law, November 2020, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3547791, focussing, however, on stakeholderism’s incapacity to redress inequality. Gatti and Ondersma aim to demonstrate that a stakeholder approach can do nothing to ameliorate inequality concerns and suggest a multidisciplinary framework to evaluate policies inside and outside corporate governance.
See the fundamental work by Sachs, J. (2015). The Age of Sustainable Development. Columbia University Press, 42, where the pathways to sustainable development are examined, including the good governance of firms.
See Rock, note 2, 6, arguing that there are four separate debates over corporate purpose: the legal, academic finance and economics, management and political debates.
Ibidem and Sect. 4.3. On the goals of corporate law, see in general Armour, J., Hansmann, H., Kraakman, R., & Pargendler, M. (2017). “What Is Corporate Law?” in R. Kraakman et al. (eds.), The Anatomy of Corporate Law: A Comparative and Functional Approach, 3rd ed. Oxford University Press, 28.
Armour, J., Hansmann, H., & Kraakman, R. “Agency Problems and Legal Strategies”, in R. Kraakman et al., note 169.
See the Ten Principles of the UN Global Compact (https://www.unglobalcompact.org/what-is-gc/mission/principles), which are derived from the Universal Declaration of Human Rights (https://archives.un.org/sites/archives.un.org/files/UDHR/udhr.pdf), the ILO Declaration on Fundamental Principles and Rights at Work (http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/normativeinstrument/wcms_716594.pdf), the Rio Declaration on Environment and Development (https://www.un.org/ga/search/view_doc.asp?symbol=A/RES/66/288&Lang=E) and the United Nations Convention against Corruption (https://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf).
See the OECD Guidelines for Multinational Enterprises, 2011, at http://mneguidelines.oecd.org/guidelines/.
Ferrell, Liang and Renneboog, note 92, 585. These authors consider well-governed firms as represented by lower cash hoarding and capital spending, higher pay-out and leverage ratio and stronger pay-for-performance.
See Mayer, note 140, 116.
Akerlof, G., & Shiller, R. (2015). Phishing for Phools. The Economics of Manipulation and Deception. Princeton University Press.
Mayer, note 140, 119.
On the BRT statement, see note 7.
Bebchuk and Tallarita, note 166, 25.
Roe, M. “Why America’s CEOs Are Talking About Stakeholder capitalism”, Project Syndicate, November 4, 2019, https://www.project-syndicate.org/commentary/america-business-roundtable-ceos-corporate-purpose-by-mark-roe-2019-11?barrier=accesspaylog.
See Ron Gilson’s remarks at the Columbia Law School Symposium on Corporate governance “Counter-Narratives”, note 4, at 19.
See Stout, note 23, 115.
European Commission (DG Justice, A3 Company law unit), Inception Impact Assessment, Sustainable corporate governance, available at https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12228-Carbon-Border-Adjustment-Mechanism.
European Commission, Communication on The European Green Deal, Brussels, 11.12.2019, COM(2019) 640 final, available at https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en#actions.
Study on directors’ duties and sustainable corporate governance. Final report prepared by EY for the European Commission DG Justice and Consumers, July 2020, https://ec.europa.eu/info/business-economy-euro/doing-business-eu/company-law-and-corporate-governance_en#studies.
European Commission (DG Justice, A3 Company law unit), note 193, 1.
See Consultation on Sustainable Corporate governance: Feedback from European Company Law Experts (ECLE), 28 September 2020, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12548-Sustainable-corporate-governance/feedback?p_id=8270916&page=10; Feedback from Assonime, 8 October 2020 https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12548-Sustainable-corporate-governance/F594565.
See Mark Roe, ‘Stock Market Short-Termism’s impact’, ECGI Law Working Paper N. 426/2018, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3171090.
See Mark Roe, Holger Spamann, Jessie Fried and Charles Wang, The European Commission’s Sustainable Corporate governance Report: A Critique, October 14, 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3711652; Jessie Fried and Charles Wang, Short-termism, Shareholder Payouts, and Investment in the EU, ECGI Law Working Paper 544/2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3706499.
See Mark Roe et al., note 206, who object that the Commission’s Report conflates time-horizon problems (short-termism) with externalities and distributional concerns.
European Commission (DG Justice, A3 Company law unit), note 193, 2.
See OECD Due Diligence Guidance for Responsible Business conduct, 2018, https://www.oecd.org/investment/due-diligence-guidance-for-responsible-business-conduct.htm; OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High- Risk Areas, https://www.oecd.org/daf/inv/mne/mining.htm.
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