Corporate Purpose Beyond Borders: A Key to Saving Our Planet or Colonialism Repackaged?
The “corporate purpose” debate has captured the attention of academics, lawyers, policymakers, and entrepreneurs around the world. Leading corporate governance scholars see it as one of the “hottest public policy issues” of our time. Governments have embraced legislation to make corporations more purposeful and financial titans have pledged over 100 trillion dollars under their management […]
Roza Nurgozhayeva is an Assistant Professor of Law at Nazarbayev University, and Dan W. Puchniak is a Professor of Law at Yong Pung How School of Law, Singapore Management University and an ECGI Research Member. This post is based on their recent paper. Related research from the Program on Corporate Governance includes Competing Views on the Economic Structure of Corporate Law (discussed on the Forum here) by Lucian A. Bebchuk; Will Corporations Deliver Value to All Stakeholders? (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; and Corporate Purpose and Corporate Competition (discussed on the Forum here) by Mark J. Roe.
The “corporate purpose” debate has captured the attention of academics, lawyers, policymakers, and entrepreneurs around the world. Leading corporate governance scholars see it as one of the “hottest public policy issues” of our time. Governments have embraced legislation to make corporations more purposeful and financial titans have pledged over 100 trillion dollars under their management to foster a broader conception of corporate purpose globally. The realization that climate change is likely the issue of the century and that any chance of successfully addressing it will require a change in the way corporations are governed, seems to justify the attention that the corporate purpose debate is receiving. And yet, the corporate purpose debate, while extremely important, has largely been built on an understanding of corporate law and governance that is local – jurisdiction bound – while the issue of climate change is global; pollution does not respect jurisdictional borders.
This myopic, jurisdictionally bound, conception of corporate purpose forms the logical foundation for Milton Friedman’s (in)famous 1970s New York Times article “The Social Responsibility of Business Is to Increase Its Profits”. In Friedman’s jurisdictionally bound world, local elections and each country’s democratic process are the linchpins holding together his theory that policy decisions related to social responsibility should be left to governments – not the management of companies – justifying his core argument that the focus of companies should be maximizing shareholder value. The idea that externalities, such as pollution, may cross jurisdictional borders and that, in turn, those impacted by extraterritorial externalities would not be part of the democratic process, was not contemplated in Friedman’s seminal article – a fact that those who both love and loath Friedman’s article have almost entirely overlooked.
