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2 - Shareholder Voice and Corporate Purpose

The Purposelessness of Mandatory Corporate Purpose Statements

Published online by Cambridge University Press:  aN Invalid Date NaN

Luca Enriques
Affiliation:
University of Oxford
Giovanni Strampelli
Affiliation:
Università Commerciale Luigi Bocconi, Milan
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Summary

In "Prosperity," Professor Colin Mayer proposes a corporate law change, advocating for social goals in company constitutions. The chapter, however, argues this requires more than a legal tweak. Analyzing two cases, it suggests shareholders resisting profit restrictions under Friedman’s principle pose challenges. Insights from French corporate statements, US reactions to Public Benefit Corporation proposals, and UK companies’ responses reveal hurdles. Proposed solutions include reducing shareholder powers or court-specified purposes. In the second case, exploring investors prioritizing non-financial goals, the chapter considers Environmental, Social, and Governance (ESG) investing. Despite alignment potential, current ESG falls short. Uncertainty surrounds its future. If successful, the chapter contends existing corporate law can accommodate goals without a mandatory purpose. In summary, it suggests the mandatory purpose requirement may be ineffective in the first case or largely unnecessary in the second, highlighting the complexities in reshaping corporate conduct.

Type
Chapter
Information
Board-Shareholder Dialogue
Policy Debate, Legal Constraints and Best Practices
, pp. 46 - 90
Publisher: Cambridge University Press
Print publication year: 2024

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