Corporate purpose in the UK: from shareholder primacy to enlightenment and the good corporate citizen

Abstract

The question of corporate purpose, in whose interests are companies run, is famously addressed in the Dodd-Berle debate of the 1930s. Given that the financial crisis of 2007-2008 is probably the worst financial crisis since the Great Depression, it is unsurprising that the Dodd-Berle question has re-emerged at this time. If, indeed, shareholder value is ‘the dumbest idea in the world’, what is the purpose of the company and in whose interests should it be run?

The UK position on this question, sometimes described as an ‘enlightened shareholder value’ (ESV) approach, is discussed in Section II which highlights that a key component in the statutory framework designed to deliver ESV is mandatory disclosure requirements. A brief tour d’horizon is called for to show the extent to which these obligations have expanded significantly in recent years to address a wide range of issues concerning the traded company’s business activities. The question discussed in Section III is whether mandatory disclosure is now being used, not as a traditional regulatory tool to drive disclosures addressed primarily to markets and investors, but as a way of establishing a framework of corporate responsibilities as to how business should be conducted. The Chapter closes with some reflections on the need to improve the disclosure framework, to develop more effective engagement, and to ensure that this approach is applied to all economically significant entities regardless of their legal structure. Finally, it is suggested that companies which can report compliance with their corporate responsibilities may be well placed to defuse the ongoing debate as to who is entitled to the spoils of the corporate venture.

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ORCID for Brenda Hannigan: orcid.org/0000-0003-1155-3287

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