Clash of Norms: Shareholder Primacy vs. Sustainable Corporate Purpose

International and Comparative Corporate Law Journal, 13 (2019) 3, pp. 40-66

University of Oslo Faculty of Law Research Paper No. 2019-56

29 Pages Posted: 29 Aug 2019

See all articles by Beate Sjåfjell

Beate Sjåfjell

University of Oslo - Faculty of Law

Mark B. Taylor

Fafo, Oslo, Norway; Department of Private Law

Date Written: August 28, 2019

Abstract

Shareholder primacy poses a fundamental challenge to sustainability. The maximization of returns to shareholders tends to externalize the negative environmental and social impacts of corporate activity, ensuring that social and environmental impacts remain on the margins of corporate concern, rather than as the defining limits of their activity. Yet, comparative research into company law has shown that mainstream legal-economic assumptions enshrining shareholder primacy as a legal purpose of the corporation are incorrect: shareholder primacy is a social norm, not a legal norm embedded in statute.

This article explores the interaction of company law with social norms, notably shareholder primacy and sustainability, to develop a ‘regulatory ecology’ of corporate purpose. Building on the results of comparative company law research, we deploy a polycentric analysis of regulation, in which the regulatory power of law interacts with the regulatory power of markets, social norms and material constraints. We focus on the dominance of the shareholder primacy norm as fundamental obstacle to corporate sustainability, and consider the options for legal reform to place the legal purpose of the corporation on a socially and environmentally sustainable footing.

Keywords: corporate law, corporate governance, corporate purpose, CSR, regulation, sustainability, SDGs, planetary boundaries, social foundation

Suggested Citation

Sjåfjell, Beate and Taylor, Mark B., Clash of Norms: Shareholder Primacy vs. Sustainable Corporate Purpose (August 28, 2019). International and Comparative Corporate Law Journal, 13 (2019) 3, pp. 40-66; University of Oslo Faculty of Law Research Paper No. 2019-56. Available at SSRN: https://ssrn.com/abstract=3444050 or http://dx.doi.org/10.2139/ssrn.3444050

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/

Mark B. Taylor

Fafo, Oslo, Norway ( email )

Department of Private Law ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

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

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