The multiplicity of Artificial Intelligence technologies has fundamentally disrupted traditional corporate governance paradigms, intensifying the longstanding tension between shareholder primacy and stakeholder capitalism. This conceptual paper develops an integrative theoretical framework examining how corporate boards can reconcile these competing imperatives in an AI-transformed business environment. Drawing upon agency theory, stakeholder theory, stewardship theory, and resource dependence theory, we propose a dynamic governance model that reconceptualises fiduciary duties for the digital age. The framework identifies AI as both a catalyst and an enabler of balanced governance—simultaneously creating stakeholder impacts demanding board attention while providing technological capabilities for enhanced transparency and multi-dimensional value creation. The present study explores four critical governance dimensions: structural mechanisms (committee architectures), process innovations (stakeholder impact assessments), competency requirements (digital literacy and ethical reasoning), and accountability frameworks (algorithmic oversight). The paper contributes to corporate governance scholarship by theorizing how boards can transcend the false dichotomy between shareholder and stakeholder interests through AI-enabled “enlightened value maximization.” The present analysis concludes with suggestions for empirical research and practical guidance for boards, legislators, and business educators navigating this evolution in corporate governance.

Background: Indonesia’s palm oil industry boosts the economy and supports renewable energy, but its expansion has caused deforestation, biodiversity loss, and social conflict. Rising external pressure makes sustainability essential, yet practices remain fragmented. Stronger corporate governance is needed to balance profit with social and environmental responsibility, as traditional agency theory no longer fully applies.Purpose: This study explores how different principal groups influence sustainability phase progression and how governance mechanisms evolve when companies face competing sustainability expectations in the agribusiness sector. This study extends agency theory beyond shareholder primacy and examines how firms navigate sustainability shifts under changing stakeholder power.Design/methodology/approach: A qualitative single-case study was conducted on PALMO (a pseudonym), an Indonesian palm oil company with vertical integration. The company’s trajectory from 1993 to 2023 was traced through interviews, focus group discussions, document reviews, and site visits. The analysis draws on the Sustainability Phase Model, extended agency theory, and the four pillars of corporate governance (ethical behavior, transparency, accountability, and sustainability).Findings/Results: PALMO’s sustainability trajectory was uneven. Progress accelerated when external pressure intensified or when internal coordination was effective, and slowed during periods of weak oversight or shifting priorities. Changes in the influence of principals (buyers, NGOs, regulators, and shareholders) either enabled movement across sustainability phases or created new constraints on the movement. Over time, governance has expanded from basic compliance to more adaptive practices, including cross-divisional sustainability teams, sustainability-linked loans, and ESG-based performance targets. These mechanisms provide ways to manage short-term business needs alongside longer-term sustainability goals.Conclusion: Multi-principal dynamics shape both progress and setbacks in sustainability phases and inform the evolution of governance. Effective governance requires adaptive arrangements that integrate sustainability into incentives, targets, and coordination structures while maintaining strategic alignment amid ongoing tensions.Originality/value: This study extends agency theory by framing governance as a negotiation among multiple principals rather than a simple alignment with shareholders. It also enriches the Sustainability Phase Model by showing that sustainability transformations can overlap, stall, or reverse, offering theoretical and practical insights into strengthening sustainability governance in emerging market agribusiness. Keywords: corporate sustainability, extended agency theory, corporate governance, palm oil industry, sustainability transformation

From the EUs Corporate Sustainability Reporting Directive to the SECs climate disclosure proposals and Japans 13.3 trillion TEPCO judgment, environmental, social, and governance (ESG) oversight has become a de facto global minimum for access to capital markets, yet directors fiduciary duties continue to oscillate between shareholder primacy and indeterminate stakeholder rhetoric. This asymmetry fosters greenwashing, regulatory arbitrage, and strike suits, rendering the legal integration of ESG into board-level obligations an urgent cross-jurisdictional challenge. Drawing on comparative statutory analysis and reflexive law theory, the paper extracts legislative techniques from Delawares Caremark doctrine, Germanys codified systematic oversight duty (AktG 91(2), 87(1)), and Japans low-threshold derivative enforcement regime to develop a transplantable framework for Chinas 2023 Company Law. The study finds that ESG is most effectively institutionalized when anchored in the duty of care rather than the duty of loyalty, operationalized through a board-level risk management safe harbor and reinforced by incentive-aligned remuneration and quantifiable, sector-specific benchmarks. The suggested one-sentence change to Article 180(2), along with a new governance code, changes sustainability from vague CSR promises into a fair and enforceable fiduciary standard. This makes long-term value creation and doctrinal clarity work together.

551 Abstract Corporate purpose is being reimagined away from profit and shareholder value maximisation, towards a wider, more sustainable, social corporate purpose (SCP), thereby potentially involving a wider range of stakeholders in corporate governance and creating value for wider society. However, it is argued that such a reimagination needs to take account of the embedded nature of the shareholder primacy value within both law, individual companies, and wider societal practices. Luhmann’s systems theory is deployed here to identify the specific legal and extra-legal challenges that those wishing to steer corporate purpose towards SCP are likely to face. Existing socially orientated corporate governance initiatives, such as corporate social responsibility (CSR), are also critiqued with reference to systems theory. The potential for steering corporate purpose is also examined, along with indicative doctrinal solutions. 552

The auto industry is a central force in the US economy and is in the midst of a profound global transition from gas-powered to electric vehicles. While public investment is necessary for such a complex and urgent transformation of a major sector of the economy, the government's engagement with the auto sector runs into a major challenge: the shareholder primacy orientation in US corporate governance, which allows companies to use the public funding to increase its payments to shareholders rather than invest in its workforce and production innovations. This article considers how past public policy toward the auto industry has held up the industry without shifting corporate practices, and how industrial policy should include corporate guardrails to maximize its success in the future.

The adaptive capacity of stakeholder-oriented firms with social purpose vis-à-vis shareholder primacy firms: A comparative assessment

Stakeholder theory is sometimes criticized by radical scholars for being pro-business and pro-capitalistic. However, stakeholder theorists recognize their disagreements with neoclassical economics and reject the notion of shareholder primacy. I argue that the rejection of shareholder primacy introduces a radical dimension to stakeholder theory, which can be further developed by drawing on the radical institutionalist literature. This literature acknowledges that private ownership can impede the social provisioning process by acting as a ceremonial drag. By adopting a radical institutionalist view of stakeholder theory, I suggest that rejecting shareholder primacy implies eliminating ceremonial elements that hinder the social provisioning process. Consequently, I see stakeholder management as a possible means of replacing these elements with discretionary community control that promotes inclusion, empowerment, and engagement of diverse stakeholders.

This review examines Bad Company by Megan Greenwell, which exposes how private equity firms dismantle essential institutions—such as hospitals, housing, and journalism—in pursuit of profit. It highlights the book’s relevance for management educators, especially in ethics, strategy, and public policy. By critiquing shareholder primacy and advocating for stakeholder-based leadership, the review positions the book as a timely resource for courses focused on responsible capitalism, governance, and systemic impact.

The globalization of human rights risks in supply chains has precipitated significant divergence in mandatory Human Rights Due Diligence (HRDD) legislation across nations. This study uses a most-similar case design to compare legislative frameworks in France, Germany, and the US, analyzing differences in liability logic, enforcement mechanisms, and remedial effectiveness. Key findings show legal traditions set liability foundations, and business-civil society bargaining intensity determines legislative stringency. The core contribution shows a positive link between "structural capacity to bypass corporate law barriers" and legislative effectiveness. France rebuilds corporate purpose via civil joint liability, Germany maintains limited liability through administrative compliance, and the United States stays stuck in greenwashing due to shareholder primacy. This research proposes differentiated governance pathways, enhancing judicial activism in civil law, exploring equity innovations in common law, and establishing an transnational tort database certified by International Labour Organization (ILO). The study offers a layered framework for localizing UNGPs and adaptive solutions for emerging economies.

Abstract Drawing on an original dataset of Delaware Caremark decisions from 1996 to 2024, this article reframes the corporate purpose debate by focusing on directors' oversight duties rather than conventional business judgment cases. It reveals a paradox: Delaware judges espouse shareholder primacy rhetoric; however, they allow Caremark claims to proceed more than twice as often when misconduct causes severe physical or mental harm to stakeholders than when it results in pure financial loss to investors. This pattern, the article argues, reflects a form of “Democratic Capitalism” in which courts filter evolving social values through a shareholder framework, protecting stakeholders when their welfare is tightly linked to long‐term firm value. By shifting the lens through which we assess corporate purpose, this article clarifies how Delaware law balances shareholder primacy with stakeholder welfare and provides fresh guidance for boards, litigants, and scholars. This article also challenges the claim that Caremark enforcement is partisan. Through a hand‐coded analysis of judicial political affiliation, it becomes clear that Republican and Democratic judges apply the doctrine with striking uniformity. Ultimately, this analysis invites a reassessment of Delaware's doctrinal understanding, revealing a more nuanced judicial posture in how Delaware courts operationalize corporate purpose in practice.

We have misconceived the nature of the fundamental driver of a business, namely its profit. We do not account for its "true costs" and therefore do not report its "fair profits". Categorising this as a market failure arising from "externalities" has resulted in wrong policy prescriptions regarding competition and regulation to address the problem. Instead, we should recognise it as a failure to define the purpose of a business appropriately. Corporate law and corporate governance standards should establish that a profit derives from solving, not creating, problems for others. This is not a stakeholder theory of the firm. It retains the notion of "shareholder primacy" in corporate law, with the duties of directors remaining solely to their shareholders, but in the context of the success of the corporation deriving from profit without harm. The difference between the United Kingdom's Companies Act 2006 and recent proposed changes to New Zealand's Companies Act 1993 illustrates the reasons why broadening objectives of firms beyond shareholders to other stakeholders does not provide an appropriate resolution of the problem of internalising externalities. As Adam Smith noted in The Wealth of Nations, inclusion of profit without harm in law is central to freedom of choice of corporate purpose, the functioning of markets, the effects of competition and the ability of firms that incur their true costs to compete against those that do not.

Advancing the environmental, social and governance (ESG) agenda through company law presents challenges, particularly in common law systems, where directors' duties are traditionally seen as prioritising the "interests of the company", a concept closely tied to shareholder interests. Courts generally avoid evaluating the merits of business decisions and focus instead on ensuring that directors follow appropriate decision-making processes. Despite this procedural focus, ESG concerns are becoming an increasingly significant factor in corporate governance. Companies are being pressured to adopt sustainable business practices, and regulatory frameworks are evolving to encourage or require directors to integrate ESG factors into their decision-making. This article explores the evolving role of directors in advancing ESG goals and argues that, while courts continue to emphasise procedural correctness, directors must adapt to the growing societal, regulatory and market expectations surrounding ESG.

ABSTRACTResearch Question/IssueCommon ownership research has rapidly expanded across multiple disciplines—economics, finance, law, accounting, and others. Limited attention, however, has been paid to the implications of shareholders investing in multiple competing firms for corporate governance. The purpose of this review is to integrate the literature on common ownership with a particular focus on corporate governance inferences.Research Findings/InsightsThis review focuses on the implications of common ownership for corporate governance and the shareholder value maximization paradigm, and specific governance facets such as shareholder activism, managerial accountability and executive compensation, board of directors, and stakeholder governance.Theoretical/Academic ImplicationsCommon ownership scholars debate whether common ownership reduces competition in order to increase industry profitability or promotes better governance that could reduce negative externalities imposed by portfolio companies on society at large. This review identifies points of contention in analyzing and assessing the impact of common ownership, synthesizes the implications for the field of corporate governance, and provides a roadmap of questions for future empirical and theoretical research.Practitioner/Policy ImplicationsIncreasing concerns by regulatory agencies regarding the impact of common ownership—shareholders concurrently investing in rival firms—on competitive actions and incentives to compete have largely ignored the implications of common ownership for corporate governance. In the context of common ownership, how does shareholder primacy embedded in governance reforms affect the pursuit of firm‐specific competitive advantage and competition for essential stakeholders and, subsequently, the long‐term viability, resilience, and competitiveness of the firm?

Abstract The Article focuses on the relevance of corporate governance in sustainable business conduct. First, it introduces the recent developments of European Union company law in the field of non-financial and sustainability reporting. Then the Article examines in detail how sustainability issues have been incorporated into the corporate governance codes of various EU Member States. As shareholder primacy viewpoint can be identified as a significant impediment to sustainable business, the Article highlights the more stakeholder-oriented approaches of corporate governance codes as favourable solutions. In its Conclusions the Article states that there is a significant progress in the examined codes regarding their emphasis on sustainability. It also summarizes the applied sustainability-related corporate governance standards and outlines a set of rules which may function as common best practice.

China, as a nominally socialist country, has a shareholder-primacy corporate governance model. Chinese company law grants shareholders strong rights, and Chinese companies have concentrated shareholding structures. As a result, shareholders can effectively dominate the board of directors and control the company. However, Chinese shareholders and companies are ultimately subject to the influence of the Chinese Communist Party (CCP). By drawing on empirical data, this article argues that Chinese corporate governance is sui generis. Shareholder primacy and party influence merge in a party-centered governance model in SOEs with party organizations (the CCP’s grassroots branches) dominating major decision-making. In private companies, shareholder primacy is the norm, and stakeholders are vulnerable to management’s exploitation and opportunism. The CCP sometimes intervenes to protect stakeholders but sometimes sides with companies. Its stance depends on its policy goals, which might vary from case to case and from time to time.

Purpose We show that employee ownership is more efficient than control by external capital owners/employers. This complements the empirical evidence for benefits of employee ownership surveyed by Mygind and Poulsen (2021), Kruse (2022) and Dow (2003), and the normative political case for democratising work made by Ellerman (1975, 2022), Ferreras et al. (2022), Piketty (2022) and others. Of course, efficiency issues are usually important in economic evaluation. Design/methodology/approach Worker mobility or “exit” is generally costly, so employers with residual control have monopsony power to exploit workers with non-contractible job utility – who are thus less than perfectly mobile and, in the absence of collective bargaining, lack countervailing “voice”. Findings The potential for wasteful conflict and exploitation is inherent in the employment relationship, and socially optimal effort is unlikely to be achieved. We show that economic efficiency in a “sticky” world (Banerjee and Duflo, 2019) with imperfect information and incomplete contracting actually requires residual control by workers rather than just capital-labour parity in “democratic socialism”, so labour should hire capital rather than vice versa. Originality/value The “labour hires capital” allocation of rights contrasts with the traditional power of capital-owning employers who claim the firm’s residual income and control of hired employees. Such shareholder primacy not only deprives employees of their rights of self-determination and generates conflict, but also, and less obviously, generally fails to attain the efficient effort-output trade-off.

Abstract This Report is an output of the European Law Institute – ELI Project on “ELI Guidance on company capital and financial accounting for corporate sustainability” (2019–2023). After brief introduction to the Project and research methodology, it provides a comprehensive review of legal-economic academic literature on corporate sustainability and capital maintenance. Following the literature review, the Report provides a legal analysis of EU primary and secondary sources of law tackling sustainability issues, including some sustainability standards, alongside relevant cases of the Court of Justice of the European Union (CJEU). This legal analysis does also include a comparative overview of national capital maintenance regimes in German, British and French company law and regulation. Although academic literature and evidence from corporate practice suggest that the stakeholder model of corporate governance has been challenged by and somewhat relegated in favour of the shareholder primacy orientation, findings presented herein show that the idea of sustainable company is deeply entrenched in EU primary and secondary legislation. The stakeholder model prevails in national company laws. The idea of corporate sustainability and longer-termism is underpinned by the mandatory rules on share capital maintenance, as stipulated in the Directive on certain aspects of company law. In fact, EU case law appears to adhere to the minimum capital maintenance regime adopted at the EU level, submitting stricter Member States regimes to the proportionality test. The concept and need of capital maintenance is further challenged by a fierce academic debate, where some scholars have suggested alternative or complementary forms of creditor protection within and outside the scope of company law. The EU fosters long-term corporate financial robustness through introducing and maintaining stakeholder model of EU company law, as explicitly provided under constitutional provisions of the TFEU; mandatory share capital rule, accompanied by remedial schemes and possibility of introducing alternative or complementary regimes (including civil law arrangements such as insurance schemes); non-financial disclosures of corporate social responsibility (CSR) and environmental, social and governance (ESG) matters, with reference to international standards (most notably UN and OECD), supported by pensalisation schemes; forward-looking remuneration policy, accompanied by the remuneration ‘capping’ scheme, deferral periods and shareholders’ binding say on remuneration proposals; and prudential requirements such as special capital and solvency requirements for financial and insurance institutions. Concerning financial accounting and reporting, corporate sustainability is not covered in EU accounting law and regulation, where fair value accounting, including accounting for IFRS 9 on financial instruments in conjunction with IFRS 13 on fair value measurements, remains a significant problem for longer-term financial sustainability, requiring alternative or complementary solutions.

ABSTRACTResearch Question/IssueUnderpinned by an eclectic theoretical framework of agency theory and stakeholder theory, this study examines whether control by family, institutional investors, or governments affects a firm's corporate social responsibility (CSR) in East Asian firms.Research Findings/InsightsBy examining 1236 firms in nine East Asian countries from 2010 to 2019, our findings show that family‐controlled firms reduce their CSR engagement since family controller strengthens the agency problem. Additionally, agency conflicts between controlling shareholders and managers may be shifted onto the controller and other stakeholders. However, if institutional investors or the government have control power, they have a positive impact on firms' CSR since they act in the interests of stakeholders.Theoretical/Academic ImplicationsThis paper addresses a lacuna in the corporate governance and CSR literature by exploring the influence of ultimate control type in East Asia, a fast‐developing but under‐researched context. We contribute to the understanding of agency conflicts among institutional shareholders, government, family controllers, and stakeholders within East Asian firms, particularly highlighting how controllers' behavior influences CSR outcomes. We extend the discussions on the complementarity of agency and stakeholder theories to explain why different types of ultimate controllers affect CSR.Practitioner/Policy ImplicationsThis paper provides recommendations for embedding CSR through corporate governance, particularly in East Asia. First, for family‐controlled firms, agency problems and shareholder primacy may become obstacles to achieving CSR. Corporate governance supervision policy should pay attention to when firms are controlled by a family. Second, external investors seeking a socially responsible firm may consider whether firms have higher institutional ownership or government control.

ABSTRACT This article seeks to empirically answer whether Australian shareholders support corporate social responsibility (‘CSR’) or prefer companies to maximise shareholder returns. Legally, companies can consider a wide range of stakeholder interests when deciding what is in the best interests of the company. Generally, most companies continue to pursue the shareholder primacy norm by seeking to maximise shareholder value. However, corporate Australia’s support for the Voice to Parliament (and before that, the plebiscite on marriage equality) departed from the shareholder primacy norm in lending its support to these causes through CSR activities. Missing from this discussion is the voice of shareholders. A survey of 236 Australians suggests that most investors would prefer companies ‘stick to their knitting’ and maximise profits. Where investors were willing to forgo some profit, the amounts are low. Yet, perversely, these investors hold prosocial attitudes in their consumer and donor decisions.

ABSTRACT The shareholder primacy model has come under increasing scrutiny in recent decades, particularly in light of climate change and other pressing global crises, with companies now expected to address the interests of a wider range of stakeholders. Stakeholder governance has thus emerged as a promising alternative model. While many jurisdictions are exploring pathways to advance more stakeholder-oriented governance models, the recent amendments to China's Company Law presents a particularly noteworthy example. This paper critically examines its newly introduced stakeholder-oriented provisions, including the mandated consideration of stakeholder interests, enhanced employee engagement requirements such as the implementation of workforce directors and adjustments to shareholders’ rights and directors’ duties. The paper analyses whether, and to what extent, these reforms represent a shift away from the shareholder primacy model as it was traditionally dominant in China. The paper makes two further contributions: first, it explores potential pathways for future reform to strengthen stakeholder-oriented governance in China; and second, it highlights lessons that can be learned to operationalise stakeholder governance for other jurisdictions.