Corporate Purpose

Document Type

Book Chapter

Publication Date

5-2025

Abstract

This chapter examines the dual nature of corporate purpose, focusing on its firm-specific flexibility and its broader role in corporate law and governance. It traces the historical shift from rigidly defined corporate charters to modern enabling statutes that allow businesses to define their own objectives, including those that incorporate stakeholder interests. The chapter explores the long-standing debate over whether corporations exist primarily to maximize shareholder value or to serve a broader social function, highlighting key intellectual contributions from Berle, Dodd, Friedman, and others. Contemporary corporate governance reinforces shareholder primacy, as institutional investors and market forces exert pressure on companies despite discussions around stakeholder welfare and environmental, social, and governance issues. Finally, the chapter argues that while corporate law grants firms flexibility in defining purpose, legal, institutional, and cultural constraints often limit their ability to prioritize anything beyond economic value.

Disciplines

Business Organizations Law | Law | Law and Politics

Comments

This book chapter was initially published online May 22, 2025.

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