AFRA AFSHARIPOUR, University of California, Davis - School of Law
Email: aafsharipour@ucdavis.edu

The debate on corporate purpose is not confined to Western developed economies. Rapidly developing economies like India are similarly grappling with how to define and develop a legal framework around corporate purpose. For over a decade, India has taken a multi-pronged approach toward redefining corporate purpose. These include voluntary guidelines, corporate social responsibility mandates in corporate law, a stakeholder-oriented articulation of director fiduciary duties, and increased sustainability disclosure for listed firms.

The success of India’s multi-pronged initiatives has been mixed. While domestic philanthropic giving has increased significantly, it is unevenly distributed. And mandatory CSR, a stakeholder-oriented approach to corporate law, and additional sustainability disclosures have made little dent in India’s massive inequality, poverty, corruption and pollution.

The Indian experience presents an important perspective for the corporate purpose debate from a country where firms are dominated by controlling stockholders. In a country where politics and business are deeply intertwined, and where powerful controlling stockholders have an outsized role, stakeholderism may make little headway. Instead, the Indian approach to stakeholderism provides an environment where corporations can use their CSR efforts and corporate purpose rhetoric to curry political favor with the state, while the state can use stakeholderism to politically signal that it values society, even in the face of rising inequality and persistent poverty.

STEPHEN F. DIAMOND, Santa Clara University - School of Law
Email: sdiamond@scu.edu

Corporate law theory finds itself at an impasse, unable to explain or resolve the intense and frequent crises that beset modern capitalism. This impasse is currently expressed in a very public debate about the “purpose� of the corporation. Both sides of this debate – agency theory and stakeholder theory – trace their origins to the deeply problematic ninety-year-old claim of Berle and Means that there is a fundamental separation of ownership from control in the corporation. Both schools maintain that “corporate governance� can solve the problems that beset the modern corporation. Both schools, however, not only failed to anticipate the ongoing corporate crises but have also failed to explain them. They have certainly not managed to prevent them. The re-emerging debate about the purpose of the corporation offers an opportunity to reassess corporate law theory. Applying the insights of the Warwick School on strategic decision-making in firms, I test an alternative approach through a case study of Apple Inc.’s capital structure and dividend policy. I conclude that the corporation is governed by a relatively coherent capitalist class that carries out the dominant economic laws of the capitalist system.