Yearly Archives: 2019

There is now a growing consensus that corporations must focus on corporate purposes beyond stockholder value. As Blackrock’s Larry Fink recognized in his 2018 letter to CEOs (and largely reiterated in his 2019 letter), “society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential.” [1] Similar views have been expressed by, among others, State Street, Vanguard and other institutional owners. [2]

Yet the continuing dominance of stockholder primacy ideology constrains the debate on corporate purpose by limiting the participants to stockholders, corporate leaders, corporate lawyers and scholars. Left out of this debate are the many who are significantly impacted by corporate behavior, including the communities where corporations are based, employees who rely on the corporation for the bulk of their income and wealth, consumers who use the corporation’s products, and broader governmental interests who expect the corporation to follow the rules of law established by society and which lack the resources to continually monitor the corporation to ensure that the established rules are being followed. In short, the constituents identified by Larry Fink and others as being at the core of the corporate purpose debate are the same groups excluded from participating in the debate over corporate purpose.

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