Beyond Shareholder Value: Exploring Justifications for a Broader Corporate Purpose

Abstract

The view of corporations as private creatures whose role consists mainly of offering enhanced economic efficiency has long dominated. More recent developments, however, suggest that a change may be underway. Starting with the global financial crisis, and in recent years influenced by climate change concerns, the idea of a broader, more stakeholder-oriented corporate purpose has been gaining traction. Yet, while there is a large body of scholarship on revised approaches to the corporate purpose, there has been much less emphasis recently on analyzing the justifications that may support such a shift. This chapter thus further explores these justifications. It first examines theoretical justifications based on social contract and related theories; corporate power; business’ influence on rule-making; international arbitrage; and negative externalities. The chapter then moves to discuss whether there is a ‘business case’ for stakeholderism and also engages with recent scholarship arguing that stakeholderism is harmful to stakeholders.

Keywords: Corporate purpose, stakeholder theory, shareholder wealth maximization

JEL Classification: K22