The Business Roundtable (United States), has recently revised its ‘Statement on the Purpose of a Corporation’ and walks away from the age old ‘shareholder primacy’ mantra. This new Statement re-positions the purpose of the corporation to include a focus on all stakeholders, rather than placing shareholders above all others. We believe this represents a significant symbolic turning point and will commence the process towards a new dissertation for the ‘Modern Corporation,’ apt for living in the post-industrial age. Our report revisits this age-old debate and provides insights for technology companies living in the 21^st century.

Contents

The US appears to be shifting the model to a more inclusive model for all stakeholders, not just shareholders

Shareholder primacy is heavily lifted from Milton Friedman’s work on free market economics – but the circumstances are changing

We believe that times have changed and with these changes is the need to broaden the focus of our modern-day corporations

The primacy of shareholders is already challenged and at risk of systemically leading to sub-optimal outcomes for societies and ultimately corporates themselves

Some will certainly argue you cannot have ‘more than one master’ and multiple objectives is too confusing or that a corporation simply can’t run without being profitable

So, how are we going in Australia and New Zealand?

According to the Governance Institute, the shareholder primacy is not enshrined in law, and as such decision makers are free to make decisions following consideration of the merits to all stakeholders

Conclusion

Appendix 1: Charts

Appendix 2: Statement on the Purpose of a Corporation

List of charts/tables

Figure 1. Responsible investment in AUM as a proportion of TAUM (Australia)

Figure 2. Responsible investment in AUM as a Proportion of TAUM (New Zealand)