beyond increasing profits is both detrimental for firms and exceeds what managers have been trained to do, whereas many in the second camp hold that working toward ‘pro-social’ purposes like environmental, social, and governance (ESG) goals should – nay, must – become a widespread corporate obligation. 4 Another way of saying this is to note that between the two camps there exists a conceptual gulf in the unit of analysis, where some understand ‘corporate purpose’ to refer to a characteristic or feature of individual firms, whereas others see purpose as a claim
“Corporate purpose” has become a battleground for stakeholders’ competing desires. Some argue that corporations must simply generate profit; others suggest that we must make them create social change.
Leading organization studies scholar Timothy Kuhn argues that this “either-or” thinking dramatically oversimplifies matters: today’s corporations must be many things, all at once.
Kuhn offers a bold new Communicative Theory of the Firm to highlight the authority that creates corporations’ identities and activities. The theory provides a roadmap for navigating that battleground of competing desires to produce more responsive corporations.
Drawing on communicative and new materialist theorizing, along with three insightful case studies, this book thoroughly redefines our understandings of what corporations are “for.”
Purpose Corporate purpose determines beneficiary rights – that is, in whose interests the organization is expected to run. UK company law permits but does not require companies to define a specific corporate purpose in their articles of association. 1 If no such purpose is specified, it defaults, as discussed in Chapter Two , to a position that defines the fiduciary duty of the company directors in terms of promoting ‘the success of the company for the benefit of its members as a whole’ – that is, prioritizing its shareholders. 2 These default rules
With respect to corporate purpose, the corporate social responsibility (CSR) debate noted in the Introduction is, in one respect, over. Those who, like the representatives of the Chicago School of Economics, argue that the sole purpose of a corporation is to deliver profits to shareholders seem to have lost the argument to those who contend that corporations must be responsive to a much broader set of stakeholders, at least in the public square. Some corners of legal scholarship, however, continue to hold that a commitment to shareholder value maximization (SVM
livelihoods at stake, and users and carers have support arrangements that could be put in jeopardy. One way of addressing this deficit is changing the Companies Act to redefine a company’s responsibilities beyond the promotion of shareholder interests. Corporations in the UK were originally established with clear public purposes; it is only over the last half-century that the corporate purpose has come to be equated solely with profit and the primacy of shareholder interest. A re-conceptualisation of the corporation around social purpose and mission is therefore long
: assessing whether competence approaches are up to the task of addressing the problem of purpose under communicative capitalism. Not surprisingly, I think they’re limited in a few important ways. First is that, as strategic theories of the firm, they seek to explain how competitive advantage is generated. That’s to be expected. But in so doing, they tend to ignore competing logics of corporate purpose, those that might broaden the aims of the firm and enable an exploration of the many motivations characterizing principals and the shifting demands of publics (and markets
organization that is incorporated – which, in turn, are directly implicated by their corporate ownership structure. We use ‘ownership’ in this context as a shorthand for the legal design of a bundle of rights, set out in the firm’s constitution and in corporate law, that determines the parameters for how the corporation will be governed (further discussed in Chapter Four). Beneficiary rights derive from rules that set the organization’s corporate purpose and define the fiduciary duties of directors, determining whose interests they are meant to prioritize. Related
beneficiary rights can expect their own interests to be prioritized by the corporation’s decision-makers. Typically, these rights are set out in the rules on corporate purpose and the fiduciary duties of directors. Control rights, on the other hand, relate to the allocation of key decision-making power within the organization, the exercise of which may be direct or, through rights to appoint and to dismiss, and to hold those running the organization to account, indirect. Economic rights in turn determine how and to whom profits (and assets) may be distributed or indeed what
achieved by the academy itself. Measures of its displacement should include an ongoing assessment of relevant curricula content in business schools, university departments and advanced level school curricula. A revised agenda: corporate purpose beyond profit? We appear to have the capability to develop and establish permanent sustainability. But as corruptible human beings, we are by no means all committed to its achievement. Setting aside the criminally intent, we are divided between, on the one hand, the neoclassically inspired, ‘ruthlessly hard
which are incorporated there, including in relation to criteria of corporate purpose (beneficiary rights), decision-making power (control rights) and profit distribution (economic rights). We can assume that aspects of this transitioning process are relatively low-cost. The state would change its tendering strategy, and while this might require some policy or even legal changes, further demands on resources would be limited, broadly speaking, to providing education and information regarding the new regime. Once a commitment to a new policy has been made, it would be
