A New Social Corporate Purpose: Stakeholders, Legitimate Expectations and Unfair Prejudice

Abstract

This article explores a legal solution, via the legitimate expectations doctrine, to calls for reform of corporate purpose away from shareholder value maximisation and profits, towards a social corporate purpose (SCP). Such a reform would also be used to facilitate corporate human rights due diligence (HRDD) and environmental, social, governance (ESG) initiatives. The paper considers reasons for removing the focus on profits and shareholders, as well demonstrating why legal reform is necessary, with reference to existing corporate social responsibility (CSR), HRDD and ESG.

The proposed solution begins with the concept of legitimate expectations from UK law, developed in public law jurisprudence, but also previously present in UK company law, via the unfair prejudice action. It is argued that the unfair prejudice action, applicable to shareholders only, should be made available to all stakeholders, as well as making specific reference to SCP, HRDD and ESG policies and reports.

Keywords: Corporate purpose, business and human rights, corporate law, ESG, legitimate expectations, corporate social responsibility, unfair prejudice,