Winner of the SLS Annual Conference Best Paper Prize 2011: Giving purpose to the corporate purpose debate: an Equitable Maximisation and Viability principle

Abstract

Over the years, there has been an explosion in the mainstream scholarship of various academic disciplines on the issue of the appropriate corporate objective, which has been framed by a debate between the shareholder wealth maximisation and stakeholder-orientated theories. Behind the two paradigms is a complex set of controversies on which there exists wide disagreement. What is certain is that the prevailing theories have obvious normative and/or practical limitations and neither is to be extolled as an affirmative theory, for different reasons. The purpose of this paper is to cut through the consequent knot of partial and inaccurate dialectic in order to develop a positive normative principle of the corporate objective. This will be referred to as the Equitable Maximisation and Viability principle. The objective of the corporation as a separate legal entity should be to: (i) respect, protect, and fulfil the demonstrable, legitimate interests and expectations of the constituent groups that contribute to the corporation; and (ii) to facilitate the corporation's viability so that its future is guaranteed with sufficiently high probability. This theory is justifiable on the basis of the values of equality and efficiency.