For whom is the corporation managed and what is its purpose? A stakeholder perspective based on the law of Delaware

This Chapter argues that the purpose of the corporation is to prosper within the boundaries of law, ethics, and nature. If it does prosper, as an implication, shareholders and stakeholders should both benefit. This perspective takes seriously the stakeholder views articulated by the Business Roundtable, the British Academy, and the World Economic Forum, each of which today recognizes the importance of stakeholder relationships to the success of the business enterprise. This stakeholder-oriented view of the corporate purpose relies upon the corporation’s character, which by law is independent of all stakeholders, including shareholders, and it is consistent with corporate law in Delaware. The basis of the argument is that a stakeholder corporate governance orientation encompasses a more accurate description of “the corporation, " certainly the public corporation, than does the major competing perspective, shareholder primacy. Shareholders have certain protected governance roles within corporations. Yet, Delaware law shows that in circumstances where some shareholders might propose actions that are financially beneficial for short-term shareholders but inimical to the best interest of the corporation and its long-term shareholders, the corporation’s independent interests predominate. This argument does not suggest that the purpose of the corporation is to directly advance stakeholders’ interests, or that directors have fiduciary duties directly to all stakeholders, as in some European systems. Rather, the purpose is to advance the corporation’s interests, recognizing it as a separate legal entity. Prospering according to the limits of law, ethics, and nature will benefit the corporation, may benefit its shareholders and its other stakeholders, and has the potential to advance social and environmental welfare, at least in circumstances where domestic laws are well constructed and enforced, or where global voluntary norms defining corporate responsibilities are well-developed.