We are at a moment in history when we need our corporate businesses more than ever to help us cope with the unprecedented challenges ahead.
Many corporations have a greater turnover than the GDP of most countries. 500 corporations control about seventy percent of world trade and each year approximately 3 million new limited liability companies are registered. Therefore, the way these corporations are managed can affect the potential for either positive or negative change.
The maximising shareholder value theory, that came to dominate our thinking and policy-making over the preceding decades has contributed to the recent financial crises. It has been blamed for some of the worst excesses in corporate behaviour, externalisation of costs, and growing inequality. Academics are now broadly questioning the basic tenets upon which it was built. Policy makers are alive to one of its manifestations, short-termism, and are seeking ways to mitigate that type of thinking. A problem in that regard is that they often simply seek to fix the problem by deploying solutions which serve to further entrench shareholder primacy and in turn facilitate capital markets’ pressure on companies. They never think to ask the fundamental question: "Does this paradigm actually work?"
There is now ample evidence that the maximising shareholder value paradigm is flawed economically, legally and socially. What is lacking is a platform for the development of a coherent vision for a new paradigm of corporate governance which will be more beneficial for society than the present one but which will still allow corporations to remain profitable and provide jobs and innovative solutions to society’s growing needs. In order for such a beneficial paradigm shift to occur there must be a collaboration between academics across a number of disciplines, business leaders, policy makers and civil society.
Frank Bold leads the Purpose of the Corporation Project, which provides a strategic, open-source platform for leading experts and organisations interested in promoting the long-term health and sustainability of publicly listed companies in policy-making and business management. The Project hosted a global roundtable series on corporate governance that brought together experts from business, academia, regulators and civil society to develop new options for corporate governance models. Discussions were held in London (Cass Business School), New York (NYU Stern School of Business), Zurich (University of Zurich), Breukelen in the Netherlands (Nyenrode Business University), Paris (Charles Léopold Mayer Foundation), Oslo (University of Oslo).The closing event was held in Brussels (Sustainable Companies Summit) and featured the launch of the “Corporate Governance for a Changing World Report”.
For more information, please visit the dedicated website www.purposeofcorporation.org.