Corporate Purpose and the Misleading Shareholder vs Stakeholder Dichotomy

51 Pages Posted: 22 Feb 2022 Last revised: 29 Aug 2023

See all articles by Beate Sjåfjell

Beate Sjåfjell

University of Oslo - Faculty of Law; College of Europe - European Legal Studies Department; EUSFIL Jean Monnet Centre of Excellence

Jukka Mähönen

University of Oslo - Faculty of Law; University of Helsinki - Faculty of Law

Date Written: February 21, 2022

Abstract

Corporate purpose has again become a topic of discussion in company law and corporate governance. In the European Union (EU), the tension between the societal approach to companies with its long history and the efficiency-based approach with its much shorter history (and weaker basis) is palpable in the heated debates ever since the European Commission launched its Sustainable Corporate Governance initiative in 2020. In this debate, shareholder primacy proponents have sought to frame the discussion within what we call a shareholder vs stakeholder dichotomy.

The dichotomy is misleading and dangerous in the way it takes company law proper out of the discussion and reinforces the shareholder primacy drive. We reject the dichotomy as a meaningful framing of the debate, and seek to dismantle some of the strawmen set up on the road towards sustainable corporate governance. We instead discuss corporate purpose as a matter of company law and relevant to ensuring the contribution of business to sustainability, and how such an overarching purpose could be operationalised with a redefinition of duties of the board. With this backdrop, we analyse the Sustainable Corporate Governance initiative, concentrating on company law and sustainability aspects of the proposed Corporate Sustainability Due Diligence Directive.

Keywords: EU Green Deal, Sustainability, Planetary Boundaries, Social Foundations, Corporate Law, Corporate Board, Sustainability Due Diligence, Sustainable Finance, Sustainable Corporate Governance, Corporate Sustainability Reporting, Sustainable Company Law, Agency theory, Shareholder Primacy, Stakeholders

Suggested Citation

Sjåfjell, Beate and Mähönen, Jukka T, Corporate Purpose and the Misleading Shareholder vs Stakeholder Dichotomy (February 21, 2022). University of Oslo Faculty of Law Research Paper No. 2022-43, Nordic & European Company Law Working Paper No. 22-08, Forthcoming in Bond Law Review (2022) 34(2) pp. 69-112, Available at SSRN: https://ssrn.com/abstract=4039565 or http://dx.doi.org/10.2139/ssrn.4039565

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/

College of Europe - European Legal Studies Department ( email )

Dijver 11
B-8000 Brugge, Oost Vlanderen 10000
Belgium

EUSFIL Jean Monnet Centre of Excellence ( email )

Italy

Jukka T Mähönen

University of Oslo - Faculty of Law ( email )

Karl Johansgt 47
N-0162, Oslo
Norway
+4722859534 (Phone)

HOME PAGE: http://www.jus.uio.no/ifp/english/people/aca/jukkam/index.html

University of Helsinki - Faculty of Law ( email )

Porthania 5th Floor
P.O. Box 4
Helsinki, FIN-0001 4
Finland

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