Bringing Corporate Governance Down to Earth: From Culmination Outcomes to Comprehensive Outcomes in Shareholder and Stakeholder Capitalism

Abstract

A battle rages between the partisans of shareholder and stakeholder capitalism; the very heart and soul of corporate governance is at stake. This paper advances the scholarly debate by mapping Amartya Sen’s distinction between culmination outcomes and comprehensive outcomes onto shareholder primacy and stakeholder theory. It provides foundational reasons to move away from the untenable idealism of value maximization, characterized here as a culmination outcome-oriented approach, towards a stakeholder-oriented approach that is concerned with broader comprehensive outcomes. It argues that the stakeholder approach more accurately reflects how business decision makers actually make choices; as compared to the shareholder primacy approach, which proposes that decision makers are able to seek (and should seek) to maximize a single-valued culmination score. It is argued that the value maximization approach is flawed because no decision-making space exists where a “maximal” allocation is available in its merely technical sense, free of the taint of politics or constraints of ethics. The stakeholder approach is a more realistic account of what decision-makers are actually able to do in discharging their managerial responsibilities; and thus, it provides a richer account of what they ought to do and how. While imperfect in its own way, the stakeholder approach is a more down-to-earth theory of reasoned and purposive business decision-making for addressing today’s critical problems of people and planet.

Keywords: Corporate Governance, Shareholder Primacy, Stakeholder Theory, Business and Human Rights, Efficiency, Social Choice Theory, Corproate Law, Fiduciary Duty, Business Ethics