Stakeholder Fairness and Corporate Social Impact: The Behavioral Economic Structure of Corporate Law

This study aims to bridge the gap between stakeholder capitalism—manifesting today in the evolving corporate social impact paradigm—and the historical shareholder primacy of corporate law. The emerging view of corporate purpose, particularly stakeholder capitalism, is closely related to the notion of fairness. This article demonstrates—by looking mainly at Israeli corporate law—that certain foundational concepts of behavioral economics better describe and justify the recent prominence of stakeholderism and the rejuvenated discourse of corporate social impact and purpose than does neoclassical economic theory. It concludes that the “fairness principle” provides a strong rationale for assimilating stakeholder expectations into the DNA of modern corporations by reframing corporate law.