The Business Roundtable, a group of executives of major corporations in the United States, recently released a statement on the purpose of a corporation that reflects a shift from shareholder primacy to a commitment to all stakeholders. While the statement seems radical to some, it is consistent with recent Canadian corporate law. Boards of directors in Canada have had to make decisions incorporating the concepts expressed in the Business Roundtable statement for over a decade.

The primary concern expressed by those opposed to a shift from shareholder primacy is that it undercuts managerial accountability, thereby resulting in increased agency costs and undermining the overall effectiveness and efficiency of corporations. The experience in Canada suggests such concerns are largely overblown.

A stakeholder-based governance model rejects the idea that corporations exist principally to serve shareholders. Instead, a stakeholder-based governance model requires the consideration of various stakeholder groups to inform directors as to what is in the best interest of the corporation.

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