objectifs de l’entreprise | Page 2

Belle tribune dans Fortune de MM. Colin Mayer, Leo Strine Jr et Jaap Winter au titre clair : « 50 years later, Milton Friedman’s shareholder doctrine is dead » (13 septembre 2020).

Extrait :

Fifty years ago, Milton Friedman in the New York Times magazine proclaimed that the social responsibility of business is to increase its profits. Directors have the duty to do what is in the interests of their masters, the shareholders, to make as much profit as possible. Friedman was hostile to the New Deal and European models of social democracy and urged business to use its muscle to reduce the effectiveness of unions, blunt environmental and consumer protection measures, and defang antitrust law. He sought to reduce consideration of human concerns within the corporate boardroom and legal requirements on business to treat workers, consumers, and society fairly. 

Over the last 50 years, Friedman’s views became increasingly influential in the U.S. As a result, the power of the stock market and wealthy elites soared and consideration of the interests of workers, the environment, and consumers declined. Profound economic insecurity and inequality, a slow response to climate change, and undermined public institutions resulted. Using their wealth and power in the pursuit of profits, corporations led the way in loosening the external constraints that protected workers and other stakeholders against overreaching.

Under the dominant Friedman paradigm, corporations were constantly harried by all the mechanisms that shareholders had available—shareholder resolutions, takeovers, and hedge fund activism—to keep them narrowly focused on stockholder returns. And pushed by institutional investors, executive remuneration systems were increasingly focused on total stock returns. By making corporations the playthings of the stock market, it became steadily harder for corporations to operate in an enlightened way that reflected the real interests of their human investors in sustainable growth, fair treatment of workers, and protection of the environment.

Half a century later, it is clear that this narrow, stockholder-centered view of corporations has cost society severely. Well before the COVID-19 pandemic, the single-minded focus of business on profits was criticized for causing the degradation of nature and biodiversity, contributing to global warming, stagnating wages, and exacerbating economic inequality. The result is best exemplified by the drastic shift in gain sharing away from workers toward corporate elites, with stockholders and top management eating more of the economic pie.

Corporate America understood the threat that this way of thinking was having on the social compact and reacted through the 2019 corporate purpose statement of the Business Roundtable, emphasizing responsibility to stakeholders as well as shareholders. But the failure of many of the signatories to protect their stakeholders during the coronavirus pandemic has prompted cynicism about the original intentions of those signing the document, as well as their subsequent actions.

Stockholder advocates are right when then they claim that purpose statements on their own achieve little: Calling for corporate executives who answer to only one powerful constituency—stockholders in the form of highly assertive institutional investors—and have no legal duty to other stakeholders to run their corporations in a way that is fair to all stakeholders is not only ineffectual, it is naive and intellectually incoherent.

What is required is to match commitment to broader responsibility of corporations to society with a power structure that backs it up. That is what has been missing. Corporate law in the U.S. leaves it to directors and managers subject to potent stockholder power to give weight to other stakeholders. In principle, corporations can commit to purposes beyond profit and their stakeholders, but only if their powerful investors allow them to do so. Ultimately, because the law is permissive, it is in fact highly restrictive of corporations acting fairly for all their stakeholders because it hands authority to investors and financial markets for corporate control.

Absent any effective mechanism for encouraging adherence to the Roundtable statement, the system is stacked against those who attempt to do so. There is no requirement on corporations to look after their stakeholders and for the most part they do not, because if they did, they would incur the wrath of their shareholders. That was illustrated all too clearly by the immediate knee-jerk response of the Council of Institutional Investors to the Roundtable declaration last year, which expressed its disapproval by stating that the Roundtable had failed to recognize shareholders as owners as well as providers of capital, and that “accountability to everyone means accountability to no one.” 

If the Roundtable is serious about shifting from shareholder primacy to purposeful business, two things need to happen. One is that the promise of the New Deal needs to be renewed, and protections for workers, the environment, and consumers in the U.S. need to be brought closer to the standards set in places like Germany and Scandinavia. 

But to do that first thing, a second thing is necessary. Changes within company law itself must occur, so that corporations are better positioned to support the restoration of that framework and govern themselves internally in a manner that respects their workers and society. Changing the power structure within corporate law itself—to require companies to give fair consideration to stakeholders and temper their need to put profit above all other values—will also limit the ability and incentives for companies to weaken regulations that protect workers, consumers, and society more generally.

To make this change, corporate purpose has to be enshrined in the heart of corporate law as an expression of the broader responsibility of corporations to society and the duty of directors to ensure this. Laws already on the books of many states in the U.S. do exactly that by authorizing the public benefit corporation (PBC). A PBC has an obligation to state a public purpose beyond profit, to fulfill that purpose as part of the responsibilities of its directors, and to be accountable for so doing. This model is meaningfully distinct from the constituency statutes in some states that seek to strengthen stakeholder interests, but that stakeholder advocates condemn as ineffectual. PBCs have an affirmative duty to be good corporate citizens and to treat all stakeholders with respect. Such requirements are mandatory and meaningful, while constituency statutes are mushy.

The PBC model is growing in importance and is embraced by many younger entrepreneurs committed to the idea that making money in a way that is fair to everyone is the responsible path forward. But the model’s ultimate success depends on longstanding corporations moving to adopt it. 

Even in the wake of the Roundtable’s high-minded statement, that has not yet happened, and for good reason. Although corporations can opt in to become a PBC, there is no obligation on them to do so and they need the support of their shareholders. It is relatively easy for founder-owned companies or companies with a relatively low number of stockholders to adopt PBC forms if their owners are so inclined. It is much tougher to obtain the approval of a dispersed group of institutional investors who are accountable to an even more dispersed group of individual investors. There is a serious coordination problem of achieving reform in existing corporations.

That is why the law needs to change. Instead of being an opt-in alternative to shareholder primacy, the PBC should be the universal standard for societally important corporations, which should be defined as ones with over $1 billion of revenues, as suggested by Sen. Elizabeth Warren. In the U.S., this would be done most effectively by corporations becoming PBCs under state law. The magic of the U.S. system has rested in large part on cooperation between the federal government and states, which provides society with the best blend of national standards and nimble implementation. This approach would build on that.

Corporate shareholders and directors enjoy substantial advantages and protections through U.S. law that are not extended to those who run their own businesses. In return for offering these privileges, society can reasonably expect to benefit, not suffer, from what corporations do. Making responsibility in society a duty in corporate law will reestablish the legitimacy of incorporation.

There are three pillars to this. The first is that corporations must be responsible corporate citizens, treating their workers and other stakeholders fairly, and avoiding externalities, such as carbon emissions, that cause unreasonable or disproportionate harm to others. The second is that corporations should seek to make profit by benefiting others. The third is that they should be able to demonstrate that they fulfill both criteria by measuring and reporting their performances against them.

The PBC model embraces all three elements and puts legal, and thus market, force behind them. Corporate managers, like most of us, take obligatory duties seriously. If they don’t, the PBC model allows for courts to issue orders, such as injunctions, holding corporations to their stakeholder and societal obligations. In addition, the PBC model requires fairness to all stakeholders at all stages of a corporation’s life, even when it is sold. The PBC model shifts power to socially responsible investment and index funds that focus on the long term and cannot gain from unsustainable approaches to growth that harm society. 

Our proposal to amend corporate law to ensure responsible corporate citizenship will prompt a predictable outcry from vested interests and traditional academic quarters, claiming that it will be unworkable, devastating for entrepreneurship and innovation, undermine a capitalist system that has been an engine for growth and prosperity, and threaten jobs, pensions, and investment around the world. If putting the purpose of a business at the heart of corporate law does all of that, one might well wonder why we invented the corporation in the first place. 

Of course, it will do exactly the opposite. Putting purpose into law will simplify, not complicate, the running of businesses by aligning what the law wants them to do with the reason why they are created. It will be a source of entrepreneurship, innovation, and inspiration to find solutions to problems that individuals, societies, and the natural world face. It will make markets and the capitalist system function better by rewarding positive contributions to well-being and prosperity, not wealth transfers at the expense of others. It will create meaningful, fulfilling jobs, support employees in employment and retirement, and encourage investment in activities that generate wealth for all. 

We are calling for the universal adoption of the PBC for large corporations. We do so to save our capitalist system and corporations from the devastating consequences of their current approaches, and for the sake of our children, our societies, and the natural world. 

À la prochaine…

Nouvel article sur la raison d’être par Martin Lipton et al. : « On the Purpose and Objective of the Corporation » (Harvard Law School Forum on Corporate Governance, 5 août 2020).

Extrait :

Recent events—notably including the pandemic, its disparate impact on various segments of society, and the focus on inequality and injustice arising in the wake of the death of George Floyd—have accelerated the conversation on corporate purpose. The result has been substantial, salutary reflection about the role that corporations play in creating and distributing economic prosperity and the nexus between value and values.

For our part, we have supported stakeholder governance for over 40 years—first, to empower boards of directors to reject opportunistic takeover bids by corporate raiders, and later to combat short-termism and ensure that directors maintain the flexibility to invest for long-term growth and innovation. We continue to advise corporations and their boards that—consistent with Delaware law—they may exercise their business judgment to manage for the benefit of the corporation and all of its stakeholders over the long term.

In looking beyond the disruption caused by the pandemic, boards and corporate leaders have an opportunity to rebuild with the clarity and conviction that come from articulating a corporate purpose, anchored in a holistic understanding of the key drivers of their business, the ways in which those drivers shape and are shaped by values, and the interdependencies of multiple stakeholders that are essential to the long-term success of the business.

This opportunity leads us to reiterate and refine a simple formulation of corporate purpose and objective, as follows:

The purpose of a corporation is to conduct a lawful, ethical, profitable and sustainable business in order to ensure its success and grow its value over the long term. This requires consideration of all the stakeholders that are critical to its success (shareholders, employees, customers, suppliers and communities), as determined by the corporation and its board of directors using their business judgment and with regular engagement with shareholders, who are essential partners in supporting the corporation’s pursuit of its purpose. Fulfilling purpose in such manner is fully consistent with the fiduciary duties of the board of directors and the stewardship obligations of shareholders.

This statement of corporate purpose is broad enough to apply to every business entity, but at the same time supplies clear guideposts for action and engagement. The basic objective of sustainable profitability recognizes that the purpose of for-profit corporations includes creation of value for investors. The requirement of lawful and ethical conduct ensures generally recognized standards of corporate social compliance. Going further, the broader mandate to take into account all corporate stakeholders, including communities, is not limited to local communities, but comprises society and the economy at large and directs boards to exercise their business judgment within the scope of this broader responsibility. The requirement of regular shareholder engagement acknowledges accountability to investors, but also the shared responsibility of shareholders for responsible long-term corporate stewardship.

Fulfilling this purpose will require different approaches for each corporation depending on its industry, history, regulatory environment, governance and other factors. We expect that board committees—focusing on stakeholders, ESG issues and the stewardship obligations of shareholders— will be useful or even necessary for some companies. But for all the differences among companies, there is an important unifying commonality: corporate action, taken against the backdrop of this formulation of corporate purpose, will be fully protected by the business judgment rule, so long as decisions are made by non-conflicted directors acting upon careful consideration and deliberation.

Executed in this way, stakeholder governance will be a better driver of long-term value creation and broad-based prosperity than the shareholder primacy model. Directors and managers have the responsibility of exercising their business judgment in acting for the corporate entity that they represent, balancing its rights and obligations and taking into account both risks and opportunities over the long term, in regular consultation with shareholders. Directors will not be forced to narrow their focus and act as if any one interest trumps all others, with potentially destructive consequences, but will instead have latitude to make decisions that reasonably balance the interests of all constituencies in a manner that will promote the sustainable, long-term business success of the corporation as a whole.

À la prochaine…

Alors que les entreprises se relancent péniblement, un rappel de ces mots du Forum économique mondial d’avril 2020 paraît adéquat (histoire de ne pas oublier et de ne pas faire primer l’économique et le financier sur toute autre considération).

Déclaration « Stakeholder Principles in the COVID Era »

As business leaders, we are experiencing how profoundly the COVID-19 emergency is affecting the world. Our employees face health risks in their daily lives, and challenges in performing their jobs. Our ecosystem of suppliers and customers is under extreme pressure. By doing all we can to coordinate our work, we can ensure that our society and economy get through this crisis and we can mitigate its negative impact on all of our stakeholders.

We accept our responsibility to address these crises. The first priority is to win the war against coronavirus. We need to do that while doing all we can to help our stakeholders now and, at the same time, to avoid a prolonged economic impact in the future. We will continue to embody “stakeholder capitalism” and do all we can to help those who are affected, and help secure our common prosperity.

To this end, we endorse the following Stakeholder Principles in the COVID Era:

− To employees, our principle is to keep you safe: We will continue do everything we can to protect your workplace, and to help you to adapt to the new working conditions

− To our ecosystem of suppliers and customers, our principle is to secure our shared business continuity: We will continue to work to keep supply chains open and integrate you into our business response

− To our end consumers, our principle is to maintain fair prices and commercial terms for essential supplies

− To governments and society, our principle is to offer our full support: We stand ready and will continue to complement public action with our resources, capabilities and know-how

− To our shareholders, our principle remains the long-term viability of the company and its potential to create sustained value

Finally, we also maintain the principle that we must continue our sustainability efforts unabated, to bring our world closer to achieving shared goals, including the Paris climate agreement and the United Nations Sustainable Development Agenda. We will continue to focus on those long-term goals.

The world has gone through other crises. As a global community, we will prevail this time as well. But, to do so, we must all bond together and coordinate our response. As business leaders, we pledge to stand at society’s service, to help preserve and rebuild a viable society and economy, and to do all we can for our stakeholders.

À la prochaine…

Dans « Beware of the Panacea of Stakeholder-friendly Corporate Purposes », le professeur Marco Ventoruzzo propose une critique sévèrement de l’ouverture de la gouvernance d’entreprise aux parties prenantes (Oxford Business Law Blog, 13 avril 2020). À réfléchir…

Extrait :

In this short essay (…), I take issue with the relevance and effectiveness of ’corporate purpose’ as a form of private ordering (eg, as a bylaws provision), or in other sources of soft-law (self-regulation in corporate governance codes, declarations of business associations, etc). I challenge whether these are, in fact, effective tools to induce greater commitment toward stakeholders.

(…) My possible disagreement with Mayer and other similar approaches and initiatives—or, more precisely, with a possible reading of these approaches and initiatives—lays in the excessive trust and emphasis that has been reserved to formulas concerning the purpose of the corporation and their possible consequences. Mayer argues that the corporate contract should include a reference to stakeholders and general social interests beyond value for shareholders, suggesting that this simple trick would have a meaningful impact on business conduct.

(…) The reasons are obvious.

First, these formulas are so broad, vague and ephemeral that they cannot possibly represent a compass for corporate action; they cannot provide meaningful guidance for virtually any specific corporate decision that implies a (legitimate) tradeoff between the interests of different stakeholders. Also, as precedents show, these formulas can be used even less to invoke the violation of directors’ duties and their liability. This conclusion is inevitable because the very essence of the agency relationship, the crucial function of a director or executive, is exactly mediating and balancing the different and often conflicting interests that converge on the corporation in an uncertain and evolving scenario. The idea of constraining the necessary discretion of directors within the boundaries of a simple purpose declaration is no better than the idea of writing in the contract with a painter that her work must be a masterpiece. Such an attempted shortcut to real value is self-evidently flawed.

Second, multiplying the goals and interests that directors must or can pursue, if it can have any effect at all, by definition increases their flexibility and discretion and makes it easier to justify, ex ante and ex post, very different choices. Without being cynical, from this perspective it is not surprising that these formulas are often welcomed, if not sponsored, by business associations and interest groups linked to managers, executives and entrenched shareholders.

Third, self-regulation and private ordering are often a way to avoid or delay the adoption of more stringent statutory or regulatory provisions. The former might be more or less effective, but they might also create an illusion of responsibility. The risk of putting too much trust into the beneficial consequences of these formulas is a disregard for more biting mandatory provisions, which may be necessary to avoid externalities and other market failures.

À la prochaine…

Le Code civil chinois a été adopté le 28 mai 2020. Il ne rentrera en vigueur qu’au 1er janvier 2021. Deux articles ont attirés mon attention dans une perspective de responsabilité sociétale, articles qui concerne le régime des For-Profit Legal Person (section 2). En substances, voici ce que précisent lesdits articles :

Les actionnaires ne doivent pas intenter à l’intérêt de la personne morale ou à celui des créanciers.

Les entreprises assument une responsabilité sociale.

Order of the President of the People’s Republic of China (No. 45)
The Civil Code of the People’s Republic of China, as adopted at the 3rd Session of the Thirteenth National People’s Congress of the People’s Republic of China on May 28, 2020, is hereby issued, and shall come into force on January 1, 2021.
President of the People’s Republic of China: Xi Jinping
May 28, 2020
Civil Code of the People’s Republic of China
(Adopted at the 3rd Session of the Thirteenth National People’s Congress of the People’s Republic of China on May 28, 2020)

Extrait :

• Article 83

An investor of a for-profit legal person shall not damage the interests of the legal person or any other investor by abusing the rights of an investor. If the investor abuses the rights of an investor, causing any loss to the legal person or any other investor, the investor shall assume civil liability in accordance with the law.
An investor of a for-profit legal person shall not damage the interests of a creditor of the legal person by abusing the independent status of the legal person and the limited liability of the investor. If the investor abuses the legal person’s independent status or the investor’s limited liability to evade debts, causing serious damage to the interests of a creditor of the legal person, the investor shall be jointly and severally liable for the legal person’s debts.

• Article 86

In business activities, a for-profit legal person shall comply with business ethics, maintain the safety of transactions, receive government supervision and public scrutiny, and assume social responsibilities.

Merci à mon collègue, le professeur Bjarne Melkevik, de cette information.

À la prochaine…

Gavin Hinks revient de manière intéressante sur un rapport récemment publié par Sustainability Board Report mettant en lumière l’ouverture des grandes entreprises américaines à leurs parties prenantes : « Covid-19 pandemic ‘has accelerated shift to stakeholderism’ » (Board Agenda, 1er juin 2020).

Pour accéder au rapport commenté : ici.

Extrait :

There have been many claims that stakeholder capitalism is the future for business, particularly since the beginning of the Covid-19 crisis.

But one group says it now has evidence that stakeholder priorities are beginning to take root, driven by the pandemic. The Sustainability Board Report (SBR), a not-for-profit campaign group, has looked at disclosures from the world’s largest 100 companies to find examples of stakeholder-led decision-making. The report says it found good evidence that a shift towards “stakeholderism” is under way, with 37% of the firms examined revealing “specific corporate action” to respond to stakeholder interests since the advent of Covid-19.

Caution is needed here. The group has no pre-pandemic data for comparison. However, it remains confident that its findings reveal pro-stakeholder moves that were non-existent until recently.

(…) The SBR looked at policies disclosed affecting employees, customers, suppliers and community. The biggest pandemic response appears to have been directed at communities, with 71% of firms disclosing specific action. Johnson & Johnson, for instance, announced a $300m programme aimed at frontline workers.

Customers were the next largest group to receive support, from 37% of firms; employees from 28%; and suppliers seemingly receiving scant support from just one in ten (11%) of the companies checked.

(…) There has even been much speculation that Covid-19 would do much to give the movement energy, given that shutdowns and infection caused companies to reflect much more about their relationship with employees, customers and the wider public. In March, Harvard professor Bill George wrote in Fortune magazine: “If there is any consequence resulting from the Covid-19 pandemic, it’s the acceleration of the shift to stakeholder capitalism away from companies’ singular emphasis on shareholders.”

However, the SBR concedes that the data may support one claim that companies cynically use stakeholder capitalism as a PR tool to help cover business as usual. The fact that employees and communities are the greatest focus for “stakeholder” policies means companies could be using it to cover their concern with “perception and reputation”.

“One could conclude that some companies continue to pay lip service to stakeholderism while fundamentally maintaining a short-term profit orientation,” it says.

Evidence may be building but there is some way to go before it can be said that stakeholderism is a permanent fixture of business. Agitation by investment managers may help, but many managers will struggle to see how they will juggle conflicting interests.

That said, the confluence of drivers is perhaps greater now than at any time since the end of the Second World War. More recently, stakeholder capitalism was—and remains—part of the fight against climate change. Business will be called upon to remain at the forefront of that campaign until long after Covid-19 is under control. Stakeholder capitalism is likely to remain a focus of that effort.

À la prochaine…