Corporate Governance for Carbon Majors

Abstract

We present a critical examination of the corporate governance frameworks governing carbon major corporations – those responsible for the majority of historical carbon dioxide and methane emissions. We demonstrate that the axioms underpinning the traditional focus on shareholder value maximisation are violated for carbon majors, and that therefore an exclusive focus on shareholder value has no theoretical justification for such corporations. We then lay the foundations for a ‘climate corporate governance regime’ for carbon majors, which accounts for the kind of externalities imposed by such corporations. We thus propose to tweak directors’ duties, director elections, shareholder proposals, and executive remuneration to mitigate climate externalities caused by carbon majors.

Keywords: corporate governance, climate change, corporate purpose, directors’ duties