A significant debate has developed in recent months regarding the purpose and future of corporations, the primacy of shareholder interests, and the role of the regulatory environment. The outcome could have a lasting impact on public companies. A recently released framework for public discussion in the British Academy, “The Future of the Corporation: Towards Humane Business,” centers around the view that the purpose of corporations is not simply to maximize shareholder value. The framework suggests further that corporations should specify their purposes, that some corporations with public and social functions should be required to align their purposes with social purposes, and that regulations should promote and even ensure the alignment of corporate with social purposes. This view is far removed from the general American view of the purpose of a corporation—i.e., to maximize shareholder value—and the perceived purpose of the regulatory environment—i.e., to facilitate corporations’ efforts to maximize shareholder value and to protect shareholders from misconduct.

The common understanding of the purpose of a corporation appears to be evolving in parallel to that of the purpose of the shareholder franchise. The annual vote long has been seen as an opportunity for equity holders to express their view as to whether a given corporate action would maximize the financial value of their shares. Under an expanded view of corporate purpose, the shareholder vote would become a regular opportunity for shareholders to express their values rather than simply their opinion as to how best to maximize value. Using the latitude afforded by the Exchange Act Rule 14a-8 shareholder proposal process, it is already common for shareholder votes to address a wide array of social issues such as board composition and environmental concerns, which do not directly affect a company’s financial performance during the time horizon of its strategic plan.