The term ‘corporate purpose’ has attracted substantial attention in recent times. Businesses, civil society, governments, and academics are seeking to re-define corporate purpose in a way that promotes sustainability. In contributing to this discourse, I suggest that we reexamine corporate purpose through a critical lens. The goal is to provide fresh perspectives for corporate boards who desire to create sustainable value within planetary boundaries. One approach I explore briefly here, is the possibility of reimagining corporate purpose through an integrated feminist legal theory and critical race theory lens.
A Feminist Legal Theory Perspective
First, I argue that a feminist legal theory perspective reveals that the nature of the corporation as presently constituted, is inherently masculine and that the prominence of shareholder primacy is steeped in this patriarchal context. The orthodox masculine nature focuses on ‘power’, ‘competition’, ‘dominance’ etc. The corporation’s emphasis on these values has historically been used as a yardstick to keep women out of the board room, depriving corporations of the benefit of feminine values which are more aligned towards stakeholder/community interests. This consequently gives way to shareholder primacy, which reflects the masculine character of the corporation and champions the pursuit of profit for the benefit of shareholders regardless of its impact on stakeholders (that is, employees, local communities, the environment, etc.).
This flawed nature of the corporation has hindered more productive outcomes on environmental, social and governance (ESG) issues. Therefore, to propel a paradigm shift with companies living out the purpose of creating sustainable value within planetary boundaries, there is a need to incorporate the ‘feminine nature’ or ‘female essence’, into the nature of the corporation. Such values include being ‘nurturing’, ‘helpful’, ‘kind’, ‘sympathetic’, and ‘interpersonally sensitive’. Increasing the representation of women on corporate boards is one way to incorporate such values into the corporate personae. I suggest this because studies reveal that female directors are more attuned to the need for corporate social responsibility and consider the environmental impact of business decisions, compared to their male counterparts. Therefore, boards with a critical mass of female directors tend to yield better results on sustainability compared to all-male boards. Enhancing the representation of women, and thus, creating more gender balanced boards, will go a long way in strengthening the corporate personae.
A Critical Race Theory Perspective
Applying a critical race theory approach to examining corporate purpose requires us to explore and confront practices that are embedded in the corporation that highlight a disregard for stakeholder and environmental interests. This exploration takes us back to the history of the corporation where we are reminded that corporations have been utilized to foster slavery, racial injustice, and oppression. An example is the Royal African Company, a British trading company that was originally established to engage in the exploration of gold in Africa, but was repurposed as a slave trade enterprise, and utilized in shipping millions of Africans to North America during the transatlantic slave era. Corporations today therefore need to be mindful of this historical context when defining or re-defining their corporate purpose. More particularly, contemporary companies need to be conscious of what Logan refers to as a ‘corporate responsibility to race’. This responsibility requires that as corporate citizens, companies should utilize their resources in addressing and creating awareness concerning issues of racism, racial oppression and inequality within the larger society. This nuanced perspective should be reflected in a company’s purpose statement.
In addition, a critical race theory lens draws our attention to what I refer to as ‘shareholder privilege’. Shareholder privilege refers to directors’ tendency to privilege shareholder value maximization over stakeholder interests. As with white privilege, shareholders need to be aware of their advantageous status and be proactive in directing management to factor in stakeholders’ perspectives when making business decisions. Institutional shareholders (such as pension funds, banks, credit unions, etc.) across many parts of the world have already actively taken on this role and this has helped to steer companies in the right direction.
Companies can learn a lot from critical race theory scholarship, which advocates for more inclusive spaces where minorities can share their experiences. In the same vein, within corporate settings, directors need to create safe spaces for stakeholders to share their concerns, and also actively listen and act on such concerns. This can be achieved, for example, by enhancing racial diversity within management roles and on corporate boards. Also, utilizing a critical race theory lens will help boards be more mindful of the ways in which seemingly innocuous business decisions impact those who have been systematically disadvantaged, such as racial minorities, underpaid employees, and displaced indigenous persons. With this understanding, companies would be better placed to appreciate the link between stakeholder interests, corporate purpose, and business sustainability.
A Proposed Integrated Approach
Flowing from the above discussion, embracing an integrated approach to corporate purpose drawing on feminist legal theory and critical race theory will require amongst other things, fostering gender and racial diversity on corporate boards and within managerial pipelines. It will also involve channeling resources towards tackling racism, racial prejudice, and oppression both within and outside the company and creating safe spaces for stakeholders that are affected by a company’s business activities to vocalize their concerns. It would also be useful in spurring further involvement by institutional and minority shareholders in ensuring that boards not only take ESG issues into consideration when making business decisions, but also consider their impact on racial minorities, employees, indigenous persons and other relevant stakeholders who have, and continue to be systematically disadvantaged.
In conclusion, while there is a lot of work to be done, we can learn a lot from novel approaches that lead us to re-think corporate purpose beyond the shareholder-stakeholder dichotomy. I have presented one such approach in this blog post by discussing corporate purpose through the application of feminist legal theory and critical race theory perspectives. Examining the prospects of such approaches is crucial if we are serious about achieving business sustainability across the globe. Otherwise, the corporate purpose discourse risks becoming another rhetoric.