Dynamic Corporate Purpose
Fields Pierce | 75 Vand. L. Rev. 325 (2022) |
The debate over corporate purpose has turned into a “gordian knot” where parties with entrenched beliefs about what the corporation should or should not be within society refuse to waver. There are inherent flaws with the governance models proposed by academics, politicians, and practitioners alike, so a novel method for setting and maintaining corporate purpose is required. This Note asks why there must be a one-size-fits-all approach to purpose and proposes a solution: dynamic corporate purpose.
This Note argues that states should not mandate all corporations hold the same corporate purpose but instead should use the logic of the public benefit corporation structure that allows for the firm to select its own purpose. By decentralizing corporate purpose, states like Delaware can leverage the economic advantages of shareholder primacy while also giving corporations flexibility to provide greater public benefits. States can harness the advantages of stakeholder capitalism without sacrificing the accountability and clarity of shareholder primacy. Exposing corporate purpose to market forces uses natural tension points to avoid traditional pitfalls of stakeholder-focused models—this is the power of dynamic corporate purpose.
To do so, this Note first discusses the historical evolution of the debate between shareholder primacy and stakeholder governance before analyzing the advantages and disadvantages of existing and proposed governance mechanisms. Dynamic corporate purpose fills this gap in an effort to minimize the disadvantages of existing mechanisms to provide the state with a model for economic and societal success.