Understanding the Roots of Shareholder Primacy

This chapter reviews the law of directors’ duties in a number of Anglo-American countries to assess what influence directors’ duties have had on the extent to which directors are adopting stakeholder approaches. This data allows conclusions to be drawn regarding the extent to which legal reforms are required in the area of directors’ duties to create an enabling legal framework for corporate social responsibility. The chapter also presents the results of research on the business objectives of corporations, which provides insights into how corporations themselves define their purposes. The legal interpretations of the purpose of the corporation can then be contrasted with interpretations based on directors’ views and what corporations themselves state in their business objectives.

The Evolution of Corporate Form

This chapter focuses on the evolution of the concept of corporate personality in English law. Recent developments in experiments with legal organizational forms are injecting diversity into the relative monoculture of the corporate form. Two threads are of particular interest in this chapter. The first concerns the creation of hybrid legal structures for “social enterprise.” The second stems from a revival of interest in cooperative structures, particularly in tandem with the digital economy. The chapter places these two threads in dialogue with Simon Deakin’s recent stimulating argument that the commons provides the most convincing conceptual foundation for understanding corporate governance.

From Berle to the Present

This chapter traces the evolution of the corporation through different eras of the past century, with a focus on the development of competing primacies of corporate law. Successive eras of managerialism, technocracy, and shareholder primacy are examined in the Darwinian struggle for corporate power and business success. Our understanding of the modern corporation over the last 100 years cannot be separated from the nature of American hegemony over the world system during that time frame. Likewise, it cannot be separated from America’s unique twin ideologies—individualism and American exceptionalism. Nor can it be separated from the struggle for power between the modern corporation, viewed as a system, and the American nation state. This chapter deconstructs our changing understandings as to whose interests hold primacy in governance of the modern corporation, with a constant eye on the underlying political struggle for power and meaning, and the role which theories of the corporation play in these struggles.

Socializing Capital

This chapter reviews the history of how the modern corporation developed as a form of socialized property. It enumerates some of the important consequences of those developments and briefly mentions recent trends. The empirical focus is the corporate revolution of the late nineteenth and early twentieth centuries, when the large publicly traded corporation became the dominant form of enterprise. The main point is that the socialization of property originated in the corporation when it was an extension of state power and over time retained its social character while shedding its accountability to the public.

Corporations as Sempiternal Legal Persons

This chapter considers the corporation as a time machine, providing intergenerational equity, and intergenerational efficiency. That is, the corporation can be understood as a legal innovation that historically has functioned as a means of transferring wealth forward and sometimes backward through time, for the benefit of present and future generations. In this fashion the board-controlled corporation promotes both intergenerational equity and intergenerational efficiency. Logic and evidence each suggest, however, that the modern embrace of “shareholder value” as the only corporate objective and “shareholder democracy” as the ideal of corporate governance is damaging the corporate form’s ability to serve this economically and ethically important function.

Corporate Sustainability In A Fragile Planet

New business models forming in the circular and sharing economies are enabling transitions to the adoption of sustainable business practices. Such new business models address resource depletion, issues associated with waste management, and innovative design of products and services. Transition requires new management practices and resource stewardship models that go beyond the traditional product life cycle requiring collaborative or inter-organizational governance structures. Global market challenges are faced, such as incorporating the cost of externalities, capitalizing on impact investing, developing integrated frameworks to account for sustainability performance, and enhancing corporate resilience and adaptation in regard to climate change.

Dynamic Capabilities, the Multinational Corporation, and Capture oF Co-created Value from Innovation

Extant explanations of the nature and scope of firms, such as transaction costs, property rights, metering, and “resources,” can be integrated into a more general capability-based theory of the nature and essence of the firm that recognizes the importance to the firm of creating and capturing value from innovation. The appropriability of returns from creative and innovative activity often requires the entrepreneurial creation and co-creation of markets and business ecosystems. Accordingly, market failure and transaction costs approaches need to be revamped to capture the essence of entrepreneurial and managerial activity that extends beyond the mere exercise of authority within existing firms and markets.

The Japanese Corporation

The majority of Japanese companies have taken what they regard as significant steps in the direction of accountability. In Japan, however, there is a different conception of the role of the board, the function of corporate governance, and the purpose of the corporation. This chapter argues that significant changes in these enduring Japanese corporate values and practices can only be accomplished if a more convincing theory and model of the corporation is proposed. In important respects, the contemporary evolution of corporate governance in Japan reflects the fundamental dilemmas inherent in defining corporate purpose that were first recognized by Berle and Means. The negotiation of the contemporary corporate community, purpose, and strategy in Japan will be of relevance to the definition of the distinctive orientations of Asian corporations.

Corporations In The Clouds?

This chapter considers the historical changes that have occurred in the way corporations engage in innovation, conceptualizations of disruptive innovation, and the consequences of recent developments in technology, models and movements for the corporate form (particularly boundaries), practices, and leadership. It discusses how the notion of disruption innovation has developed, and summarizes the main innovation dichotomies that have emerged from years of academic research on how corporations innovate. It then focuses on the implications of open innovation and business model innovation for the corporation, and details current responses of corporations to disruptive innovation. The chapter concludes with a consideration of how disruptive innovations are impacting the role and significance of the corporation in modern society.

Global Corporations and Global Value Chains

Many of the great international corporations of the past have now largely been disembodied into global value chains. This chapter considers the implications of the continued advance of global value chains as the mode of production for an increasing number of goods and services, and how this has impacted considerably on the economies and societies both of the developed world and the emerging economies. In turn, this has transformed corporations themselves into largely finance, design, and marketing agencies which are often distant from the production and operations which they ultimately control. While the globalization of production has brought employment and economic growth to many developing countries, it is also associated with exploitative employment relations, environmental irresponsibility, and recurrent ethical dilemmas. While corporations may disaggregate production in distant networks of contractors, they cannot as readily disaggregate the moral responsibility for the social and environmental impact of their mode of production.