Document Type

Article

Publication Date

4-5-2022

Abstract

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns – from climate change and voting rights to racial justice and wealth inequality.

The shareholder proposal rule, Rule 14a–8, offers one potential tool for repurposing the corporation. This Article describes the introduction of innovative proposals seeking to formalize corporate commitments to stakeholder governance. These “purpose proposals” reflect a new dynamic in the debate over stakeholder governance by enabling shareholders to communicate their views about corporate purpose to their fellow shareholders and management. At the same time, purpose proposals highlight the potential problems with a shareholder voting process dominated by a handful of institutional intermediaries whose interests, particularly with respect to corporate purpose, may not be aligned with those of their beneficiaries.

This Article provides the first analysis of purpose proposals. It presents data on the introduction of these proposals and the extent to which they have commanded shareholder support. It interrogates the justifications for the proposals offered by their proponents. Finally, it considers the role of the shareholder proposal rule in offering a mechanism for shareholder debate over corporate purpose.

Keywords

Corporate governance, shareholder proposals, statements of purpose, stakeholder capitalism, public benefit corporations, PBCs, institutional investors, fiduciary duty, shareholder voting, SEC Rule 14a-8, ESG

Publication Citation

1 U. Chi. Bus. L. Rev. __ (forthcoming 2022)

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