Private Law Theory

ABSTRACT
In light of systemic crises such as global warming and human rights violations in business operations, the call for reevaluating corporate conduct has become more pressing than ever. As these challenges intensify, a growing consensus advocates for a shift away from shareholder profit maximization towards a more holistic stakeholder governance model. Yet, the question of how this transition can succeed is still being explored. This Article examines how the managerial version of Corporate Purpose can serve as a foundational element that guides companies in their strategic direction and fosters the creation of shared value for stakeholders, particularly employees. This Article contributes to the debate by incorporating insights from management, organizational psychology, and legal literature and by proposing a refined definition of the managerial Corporate Purpose. Corporate Purpose, as used here, is defined as management concept that embodies the intentional commitment of companies to leverage their core business model to create shared value for people and the planet. This involves developing profitable goods and services that address societal and environmental needs while adhering to ethical principles. However, the Article also points out practical challenges in adequately embodying the managerial Corporate Purpose. Challenges include a lack of common understanding and a prevalent disconnect between rising expectations surrounding responsible business conduct and actual practices. This disconnect creates an opportunity to engage in misleading behaviors such as purposewashing. While policymakers have begun to institutionalize the idea of Corporate Purpose, current regulatory designs reveal shortcomings. Therefore, the Article proposes that firms may wish to experiment with private ordering tools, such as contract design, to enhance the credibility of their commitment. Such an approach could offer a more immediate solution compared to solely relying on legislative efforts, which take time to evolve.

Rohr, Silvie, Corporate Purpose: A Management Concept and the Role of Contract Design (August 15, 2024), 99 Chicago-Kent Law Review 17 (2024).