Faculty of law blogs / UNIVERSITY OF OXFORD

Corporate Governance Choices and the Stakes of Stakeholderism


Peer Zumbansen
Professor of Business Law, Faculty of Law at McGill University


Time to read

3 Minutes

Almost 3 years after the Business Roundtable, an association of CEOs of leading US corporations, published its Statement on Redefining the Purpose of a Corporation, it’s warranted to take stock of the impact and current state of the ‘corporate purpose’ debate the Roundtable helped reignite.

Corporate purpose – le plus ça change…?

The Roundtable’s intervention occurred ten years after the global financial crisis, almost twenty years after ‘Enron’ and thirty years after the collapse of communism. It was released, as we know in retrospect, still at a ‘pre-pandemic’ moment in time and thus has been put to a considerable test in the years since its publication. While a September 2021 poll revealed that shareholders were still coming out ahead of other stakeholders in the race for corporate attention and diligence, much suggests that the context of corporate business and the conversation around it have changed—probably irreversibly. Few seem to seriously doubt that ‘[t]he COVID-19 pandemic, as an exogenous shock with the potential to change many aspects of the economy, will push corporate governance further away from shareholder orientation by turning around a number of trends and accelerating other shifts that have already begun during the past ten years’.

Yet, as we acknowledge that ‘poor corporate track record on climate change, data security, executive compensation, workers’ rights, and consumers’ rights have fueled public support for greater regulation of corporate activity’, it is also true that ‘[s]takeholderism critics fear that corporate leaders may use stakeholderism to re-establish their legitimacy and prevent regulation through voluntary measures’. But this apparent trade-off between corporate voluntarism and governmental regulatory intervention doesn’t adequately describe what corporations themselves contribute to the evolving regulatory landscape.

The mainstreaming of ‘stakeholderism’ suggests that corporate directors address substantive pressure to actively manage and improve the diversity of their staff and their board, to adopt and communicate their stance on climate change mitigation, counter inacceptable working and human rights conditions throughout their supply chains, contribute to a sustainable economic practice and meet the staggering challenges arising from artificial intelligence, transnational data governance and fintech head-on. Consider further the role of law firms and companies in realizing the goals of, say, Air Canada’s, Denton’s and Sodexo’s commitments to battle ‘modern slavery’ and of the growing number of supply chain and modern anti-slavery legislations in the UK, France, Germany and elsewhere.

No Utopia, but a cognitive and political challenge

To make sense of this moment we need to move beyond the ‘either-or’ logics that has held corporate governance debates around ‘stakeholderism’ captive for too long. As Chris Brummer and Leo Strine argue in a new lead symposium article, ‘…corporate law itself has a positive role to play in supporting corporations in taking ambitious actions to promote Diversity, Equality and Inclusion (DEI) and contributing to a more inclusive and fair economy and nation’. Their intervention, Lisa Fairfax shows, occurs in a context of growing discontent and an amplification of critique regarding the long existing and equally neglected structural racial bias in and around companies.

Today’s business climate is both intensely local and global. It is constituted by the struggle for survival of the next coffee shop after pandemic lockdowns, by the gig worker facing the choice of driving for Uber or Prime in addition to her already existing precarious jobs, by the single parent trying to maintain employment with recurring kindergarten closures, and by the Amazon warehouse worker contemplating whether or not to join their colleagues’ brave struggle for unionization. For most workers, the incessantly hypothesized ‘return to normal’ is not a choice between ‘home office’ and ‘going in for work.’ For many, their employment or lack thereof is a daily matter of precariousness. Corporations and an expanded range of stakeholders including workers are in this process of recovery and reconstruction together. That, however, requires a fundamental shift in the board’s perspective, informed in part by an appreciation of the dramatic changes in work and employment through financialization, privatization, and technological change, and in part by a critical revisiting of how law has provided and continues to provide the code for these changes, whether we focus on DEI and ESG as core dimensions of corporate governance or on a legal framework for global supply chains.

There is no doubt about the ability and agency of corporations today to drive change. And, as William Savitt and Aneil Kovvali convincingly argue, the push for companies to take the Business Roundtable’s cue for a more inclusive approach to stakeholder governance does not logically disincentivize regulatory and legislative intervention as repeatedly implied by Lucian Bebchuk and his co-authors. Rather than forcing a choice between regulatory intervention and voluntary self-regulation, it is instead a fundamentally broadened substantive arena and a vibrant public-private and national-international regulatory landscape which together provide the context in which corporate decision-making is taking place today. This environment, not the simplified trade-off between ‘state’ and ‘market’, creates immense opportunities for a dialogue and collaboration across different actors towards developing structures of forward-looking and better corporate governance.

For the full paper on which this blog post is based, see here.


Peer Zumbansen is a Professor of Business Law at the Faculty of Law of McGill University


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