Corporate Purpose: How the Board of Directors Can Achieve an Inclusive Corporate Governance Regime

Abstract

Large corporations are currently facing critical challenges after many financial crises and scandals, which led to a loss of public confidence. In addition, inequality, climate change, and new technologies create systemic risks for corporations. In that context, economic and legal scholars, as well as directors and regulators, extensively debate issues revolving around the “profit” of corporations as well as about the “purpose” of companies, a notion that is different from their mere “object.” In our view, the theory of the purpose-driven company could help overcome the never-ending dispute between the partisans of shareholders’ wealth maximization and the promoters of stakeholder governance. To materialize and implement the company’s purpose, missions, and core values, the board of directors (in engagement with shareholders) shall assess its impact on a broader social and economic environment. The identification and expression of the purpose will facilitate the company’s value creation and long-term business sustainability. The board of directors shall further take into consideration all stakeholders as well as define and identify the main purpose recipient (customers, employees, environment, etc.). Within this frame, the board of directors will act as both a corporate purpose guardian and a mediator of the various (potentially) conflicting interests held by the different constituencies.