The Corporate Purpose Debate, 2018–20 Edition

Abstract

A debate has been raging across the world about what the purpose of the modern corporation should be. While the debate is certainly not new, the most recent point of ignition has been a statement from the Business Round-table, a group of America’s top CEOs, about the purpose of the corporation. Parallelly, the UK corporate governance code has been amended to reflect the new expectations from companies; and in Australia, the ASX Corporate Governance Principles were amended with similar themes. This article will survey these developments in the US, UK, and Australia, summarize the academic discussion around this, and finally reflect on what this means for corporations in these countries. The article will argue that rather creating a big shift to stakeholder centric governance, these developments, at least in the UK and Australia, signify a focus on corporate culture and the relationship of company management with employees. This focus on culture and employees is aimed at preventing, or addressing at an earlier stage, egregious corporate scandals. In conclusion, the article will discuss the implications of these developments for India.