Shareholders All the Way Down: EU Corporate Sustainability Reforms and the Structure of Corporate Governance

Abstract

Corporate leaders, governments, workers, activists, and even shareholders are looking beyond simplistic models of shareholder primacy to a broader understanding of corporate responsibility. This new approach has taken its strongest hold in the European Union, where three directives over the last decade have reshaped reporting requirements and directors’ duties in significant ways, pushing for greater accountability and attention to the needs of stakeholders. Changes to company disclosure regimes and directors’ duties signal an important shift in the norms of global capital, and they move the dialogue beyond narrow attention to financial performance. This Essay, however, provides a note of caution about the ceiling inherent in these directives and similar proposals. A more sustainable approach to governance must be tethered to systems of shared stakeholder governance in order to be successful. Until structural adjustments such as an expansion of voting rights or changes to board representation are undertaken, we cannot expect too much while purely financial interests are still in control.

This Essay was presented as part of the "ESG and Corporate Sustainability: Global Perspectives on Regulatory Reform" at the Dean Rusk International Law Center, University of Georgia School of Law, 2023.

Keywords: sustainability, corporate governance, corporate law, shareholder primacy, stakeholderism, codetermination

JEL Classification: K22, L21