Reflexive Law and Section 172 Reporting: Evolution of Social Responsibility Within Company Law Limits?

Abstract

The apparent need for balanced interests in company law between the shareholder value approach and the social demands for corporate responsibility to stakeholders is often exemplified by the section 172 duty to promote the success of the company. Section 172 enshrined the enlightened shareholder value (ESV) principle, which was a mediated position between the pure shareholder value approach and the pluralist stakeholder approach. The method for measuring progress on this duty has been a focus on narrative reports. Reports whose content would be largely left to the large companies but must nevertheless be written and published reflecting the balance between openness and legal rules.

This article examines whether the evolution of company narrative reporting based on section 172 Companies Act 2006 can be characterised as reflexive law which preserves the balance between utilitarian company law shareholder value approach and the corporate responsibility demands by society. Thereby mediating between semi-autonomous sub-systems of company law and social responsibility.

It discovers an evolving process in company law, which has some indications of reflexive law and governance within self-imposed limits of non-interference in ‘private’ spheres of governance. The result is progressive in scope but incapable of delivering radical normative shift in company law towards stakeholder responsibility.