Abstract: This paper sets out a radical reinterpretation of the nature of the corporation that focuses on corporate purpose, its alignment with social purpose, the trustworthiness of companies and the role of corporate culture in promoting purpose and trust. It suggests that external factors, in particular technological advances, are intensifying the need for this reinterpretation. It points to the increasing inadequacy of conventional policy responses in the form of regulation and competition policy, and the steady erosion of the traditional source of social capital from corporate taxation.
The paper records how neither the actions of the owners nor the practices of corporate governance have succeeded in providing internal resolutions to the alignment of corporate with social interests. On the contrary, the changing nature of ownership is creating a growing divergence between the functioning of the board and the interests of both shareholders and societies.
The paper puts forward an alternative approach that emphasizes the role of corporate purpose, commitments, trustworthiness and culture in which companies specify their purposes, clarify their associated commitments and demonstrate how their ownership, governance, performance measurement and management enable them to fulfil their obligations. Corporate and social purposes are aligned in companies and activities of particular social significance but not necessarily elsewhere.
The paper draws lessons for corporate practice and public policy and exemplifies how this alternative conceptualization of the firm helps address many of the major environmental, political and social issues of the 21st century.
Keywords: corporation, purpose, commitment, trust, ownership, governance, investment, technology, regulation, competition, taxation, measurement, incentives.
Article posted to Journal of the British Academy, volume 6,
supplementary issue 1 (Reforming Business for the 21st Century).
Number of pages: 16 (pp. 1-16)
Publication date: 19 Dec 2018
Author: Colin Mayer
Publisher: Journal of the British Academy