Corporate Purpose and the Misleading Shareholder vs Stakeholder Dichotomy

By Beate Sjåfjell and Jukka Mähönen, University of Oslo.

21 February 2022, SSRN

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After decades of being dormant, corporate purpose has become a hot topic of discussion again in company law and corporate governance. In the European Union, the tension between the societal approach to companies with its long history and the efficiency-based approach with its much shorter history (and weaker basis) is palpable in the heated debates ever since the European Commission launched its Sustainable Corporate Governance initiative in 2020. In this debate, especially shareholder primacy proponents have been very vocal and ideological in their contributions, seeking to frame the discussion within what we call a shareholder vs stakeholder dichotomy.

The dichotomy is not only misleading, it is outright dangerous in the way it takes company law proper out of the discussion and reinforces the shareholder primacy drive. We therefore reject the dichotomy as a meaningful framing of the debate. We turn instead to a discussion of corporate purpose as a matter of company law and in ensuring the contribution of business to sustainability. We discuss how such an overarching purpose could be operationalised with a redefinition of duties of the board, and we seek to dismantle some of the strawmen on the road towards sustainable corporate governance.

University of Oslo Faculty of Law Research Paper No. 2022-43, Available at SSRN:

Published Feb. 23, 2022 8:40 AM - Last modified Feb. 23, 2022 8:40 AM