Sustainability Through Corporate Purpose : A New Framework for the Board of Directors
Shareholder primacy and shareholder wealth maximization have been advocated by business leaders and legal scholars for decades.In view of the numerous challenges that the economy – and more broadly the humanity – are facing, this (simplistic) approach is criticized. Many companies are willing to move beyond the rule of shareholder value maximization and, while remaining profitable, have a positive impact on society through their business activity.In addition, several economic scandals as well as the financialization of the global economy have led to a loss of confidence in the capitalist system. At the same time, social and ecological imperatives have taken on an almost ubiquitous importance in everyday life, exposing society and companies to substantial risks as well as opportunitiesThe object of this contribution is to discuss the objectives and interests the corporation serves. Several models have been elaborated to address this question, including the two major theories that are (i) the shareholder value maximization, and (ii) the equivalent promotion of the interests of all of the company’s stakeholders, such as customers, employees, suppliers, the community and its shareholders (stakeholder governance). In addition, the so-called enlightened shareholder value approach tries to reconcile these two concepts but keeps the basic principle that, in the long run, shareholder interest shall prevail.As we will see, the dichotomy between shareholders’ and stakeholders’ interests may not be the adequate way to address the objectives of a company.A new concept that we endorse focuses on the purpose – the raison d’être – of the company and its mission to act in a sustainable manner, while the (necessary) profit that derives from this activity is a by-product of the business and not its primary objective. We consider that the definition and implementation of a corporate purpose is the most appropriate process for the board of directors and management to achieve a sustainable as well as profitable business activity, which necessarily encompasses economic, social and environmental components. The corporate purpose statement offers guidance to the managing bodies of a company to determine the necessary and difficult trade-offs between the different stakeholders and set priorities in the long-term interest of the company.Corporate directors and managers have a crucial role to play in this context since the achievement of a sustainable as well as profitable activity is a central – if not the most important – duty of the board of directors. However, the fulfillment of such duty requires the cooperation, assistance and understanding of all stakeholders, and in the first place of the shareholders
Year of publication: |
[2023]
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Authors: | Blanc, Mathieu ; Chenaux, Jean-Luc |
Publisher: |
[S.l.] : SSRN |
Subject: | Corporate Governance | Corporate governance | Vorstand | Executive board | Nachhaltige Entwicklung | Sustainable development | Corporate Social Responsibility | Corporate social responsibility |
Saved in:
freely available
Extent: | 1 Online-Ressource (37 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | In: in CEDIDAC Publications (Center of Business Law of the University of Lausanne [Switzerland]) Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 15, 2023 erstellt |
Other identifiers: | 10.2139/ssrn.4518467 [DOI] |
Classification: | G20 - Financial Institutions and Services. General ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance ; K20 - Regulation and Business Law. General |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014352976
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