The Problem of Purpose in Corporate Law

For the last half century, shareholder primacy has reigned as the dominant definition of corporate purpose, as to both the purpose of individual companies and corporate law more generally. Recently, however, the Business Roundtable, the American Law Institute’s Restatement of the Law: Corporate Governance, and many business and legal academics have developed new answers to explain why we have corporations, and the ends to which their massive economic powers should be directed. This Essay endeavors to reframe the focus of the debate beyond purpose itself into the realm of actual governing power. In order to be meaningful, purpose needs governance. While an expansion of corporate purpose to consider the interests of corporate stakeholders would be a positive development, that change will not make a difference unless governance is also restructured to accommodate those stakeholders. We need to undertake the complicated but ultimately rewarding work of restructuring corporate governance if we want to replace shareholder wealth maximization as our orienting economic principle.