Work

Corporate Purpose and Democratic Theory: A Governance Trilemma

Year: 2025

Type: article

Abstract: Over the last years, both in the popular press, policy and business circles and in academia, people call for corporations to orient their behavior towards ‘purpose’. This is meant as a move away from shareholder value maximization as the lodestar for corporate action. But purpose-advocates are torn between two directions in thinking about corporate governance: towards corporate governance on behalf of stakeholders by an independent board, and towards corporate governance by stakeholders through a responsive board. The paper’s aim is to enlighten this choice by placing it in a trilemma with a third option: corporate governance on behalf of shareholders. This corporate governance trilemma shows us which trade-offs are at stake in making choices between the relevant values: the minimization of externalities, collective decision-making costs and agency costs. It discusses the various trade-offs in the trilemma. Finally, the paper argues that corporate purpose is best served by a balance between board independence and responsiveness.

Source: Journal of Business Ethics

DOI: 10.1007/s10551-025-06127-1

Author: Rutger Claassen

Institution: Utrecht University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,790