Document Type

Article

Publication Date

2022

Abstract

One of the most significant recent phenomena in corporate governance is the embrace, by some of the most influential actors in the corporate community, of the view that corporations should be focused on furthering the interests of all corporate stakeholders as well as the broader society. This stakeholder vision of corporate purpose is not new. Instead, it has emerged in cycles throughout corporate law history. However, for much of that history—including recent history—the consensus has been that stakeholderism has not achieved dominance or otherwise significantly influenced corporate behavior. That honor is reserved for the corporate purpose theory that focuses on shareholders and profit. Thus, many view the most recent embrace of stakeholderism as empty rhetoric. In light of this view, and the relatively fickle history of allegiance to stakeholderism, this Article seeks to explore whether we can expect that this most recent resurgence of stakeholderism will be different, and hence whether we can expect that corporate actors will work to ensure that their corporations in a way that benefits all stakeholders.

Relying on the theory of credible commitment—a theory focused on predicting whether economic actors will comply with their promises—this Article argues that there are considerable obstacles to achieving stakeholderism. This Article first argues that there are some reasons for optimism that this most recent embrace of stakeholderism will translate into reality. Second, and despite that optimism, this Article draws upon credible commitment theory to argue that it is unlikely that stakeholderism will have a lasting impact on corporate conduct unless corporations make a credible commitment to operating in a way that advances stakeholder interests and a broader social purpose. Third, this Article not only highlights the significant credible commitment challenges posed by efforts to pursue a stakeholder-related corporate purpose, but also reveals significant concerns with the ability of prevailing reforms to overcome those challenges. Nevertheless, this Article argues that these concerns do not necessarily doom to failure the credible commitment effort. Instead, relying on the too often overlooked emphasis credible commitment theory places on norms, this Article insists that the collection of governance mechanisms aimed at achieving credible commitment, even if flawed, may facilitate norm internalization in a manner that increases the likelihood that corporate actors will align their behaviors with stakeholderism.

Keywords

Corporate governance, purpose, shareholder primacy, stakeholders, sustainability, corporate social responsibility, CSR, environmental, social, & governance, ESG, norms, credible commitment

Publication Title

Virginia Law Review

Publication Citation

108 Va. L. Rev. 1163 (2022)

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