Stakeholder Fairness and Corporate Social Impact: The Behavioral Economic Structure of Corporate Law

Abstract

This study aims to bridge the gap between stakeholder capitalism, manifested today in the evolving corporate social impact paradigm and the shareholder-focused history of corporate law. The main thesis of the article is that the new view of corporate purpose and stakeholder capitalism is closely related to the notion of fairness and hypothesizes that certain foundational concepts, which were developed in the realm of behavioral economics, rather than traditional economic theory, describe and justify the newfound prominence of the stakeholder approach and the rejuvenated discourse around corporate social impact and purpose. The article concludes with the idea that the fairness principle provides a good foundation for assimilating stakeholder expectations into the DNA of modern corporations and managerial discretion by reframing the underlying approach to Companies Law—the primary legislation that regulates business sector activities through artificial legal entities.

Keywords: Corporate purpose, corporate social responsibility, behavioral law and economics, fairness, stakeholders, stakeholder governance, stakeholder capitalism, corporate constituencies, corporate governance, Business Roundtable

JEL Classification: A13, D21, D62, E70, E71, G32, G34, G38, G40, G41, K22, L21