Dismantling the Legal Myth of Shareholder Primacy: The Corporation as a Sustainable Market Actor

Shaping the Corporate Landscape Towards Corporate Reform and Enterprise Diversity, Eds. Boeger and Villiers, Hart Publishing (2018)

University of Oslo Faculty of Law Research Paper No. 2017-03

Nordic & European Company Law Working Paper No. 16-20

15 Pages Posted: 6 Feb 2017 Last revised: 25 Feb 2018

See all articles by Beate Sjåfjell

Beate Sjåfjell

University of Oslo - Faculty of Law

Date Written: February 6, 2017

Abstract

The convergence of crises that we face as a global society, with its grand challenge of how to achieve social progress for all without destroying the very basis of our existence, emphasises the importance of discussing the role of the market actors. We cannot achieve environmental, social and economic sustainability of our societies without the contribution of the market actors (businesses, investors, consumers and the public sector in its many roles as market actor). With many difficult questions ahead, there is one thing we know for sure: the ‘business as usual’ path market actors in aggregate are on is not an option for sustainability; it is a very certain path towards a very uncertain future. A fundamental transition away from ‘business as usual’ and onto a sustainable path is necessary. Such a fundamental transition requires sustainable market actors.

The paper focuses on what this means for business and more specifically, for the dominant business form of the corporation. In a time where social entrepreneurship in various shapes and sizes receives much (and undoubtedly warranted) attention, whether and how the dominant business form of the corporation fits into a sustainable future also needs to be discussed. This can be rephrased as a question of how to achieve corporate sustainability.

The paper begins by discussing the role of the corporation in the unsustainable ‘business as usual’, based on the results of the Sustainable Companies Project (Section II), which shows that the main barrier to corporate sustainability is the social norm of shareholder primacy. This norm has become so dominant that it has turned into a legal myth, and corporate sustainability requires a dismantling of this myth. Section III presents a summary of the tentative reform proposal with this aim, while Section IV concludes with reflections on the work that needs to be done, where the mitigation of the legal myth of shareholder primacy is placed in the broader context of the ongoing research project Sustainable Market Actors for Responsible Trade (SMART).

Suggested Citation

Sjåfjell, Beate, Dismantling the Legal Myth of Shareholder Primacy: The Corporation as a Sustainable Market Actor (February 6, 2017). Shaping the Corporate Landscape Towards Corporate Reform and Enterprise Diversity, Eds. Boeger and Villiers, Hart Publishing (2018); University of Oslo Faculty of Law Research Paper No. 2017-03; Nordic & European Company Law Working Paper No. 16-20. Available at SSRN: https://ssrn.com/abstract=2912141 or http://dx.doi.org/10.2139/ssrn.2912141

Beate Sjåfjell (Contact Author)

University of Oslo - Faculty of Law ( email )

PO Box 6706 St Olavsplass
Oslo, 0130
Norway

HOME PAGE: http://www.jus.uio.no/ifp/english/people/aca/beatesj/

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