The Business Roundtable recently issued a much commented upon Statement on the Purpose of a Corporation (the “Statement”). The Statement purports to redefine the purpose of a corporation as a commitment to all of its stakeholders, including customers, employees, suppliers, communities and, finally, shareholders. Much has already been written speculating on the timing and motivation for the Statement. A more fundamental question is whether it is legally correct or necessary.

In Delaware, where many US public companies are incorporated, the law provides that the business and affairs of a company are entrusted to the oversight of its board of directors. Those directors have a fiduciary duty to act in the best interests of the shareholders. That reflects the basic fact that shareholders own a company, and the directors, and the CEOs those directors choose, are acting on behalf of the shareholder owners.

(more…)