By Dr Min Yan
Growing concerns about the externalities that companies may impose on stakeholders have placed the mainstream shareholder primacy model under intense scrutiny. ‘Stakeholderism’, or stakeholder governance, as an alternative approach that requires companies to take wider responsibilities beyond the narrow pursuit of shareholder interests, is increasingly accepted as a way to pursue the success of the company. Significant initiatives such as the British Academy’s Report on the Future of the Corporation (2018), the US Business Roundtable’s Statement on the Purpose of a Corporation(2019), and the World Economic Forum’s Davos Manifesto (2020) have all highlighted that companies serve or ought to serve not only shareholders but also employees, customers, suppliers, local communities and society at large.
Policymakers and legislators around the world are also working to ensure that companies can create value for all its stakeholders. For instance, France’s 2019 Loi Pacte amended Art.1833 of the French Civil Code to mandate that all French companies to be managed ‘in the corporate interest, taking into account the social and environmental concerns linked to its activity’. In the United States, the American Law Institute’s Restatement of the Law of Corporate Governance restates the objective of a company with a strong emphasis on stakeholder interests. Against this backdrop, there is growing support for the view that company law should intervene more robustly to safeguard stakeholder interests.
Nevertheless, one of the principal criticisms of stakeholder governance remains its practicability and enforceability. In a recent article, I examine how China’s recent Company Law amendments operationalise stakeholder governance, offering important insights into its real-world application.