Stuck in Neutral? Reforming Corporate Purpose and Fiduciary Duties

After decades of corporate leadership based on shareholder wealth maximization, momentum is now gathering behind a shift towards the recognition of stakeholder interests. However, from voluntary actions by business to changes in soft and hard law, the steps taken thus far have been insufficient to result in meaningful changes. Instead, we are stuck in neutral. A more decisive push is needed to ensure that business contributes to tackling the most pressing societal issues of our times in a substantial and timely manner. The Canadian corporate landscape, although beginning to shift away from shareholder primacy, is still not settled and in many ways has stagnated since the Supreme Court’s decisions in People’s and BCE. The CBCA’s new section 122(1.1) codifies that case law and therefore cannot be expected to provide a new impetus. Drawing from the experience in the United Kingdom, which previously introduced legislation similar to the Canadian reforms, we suggest that more than minor tweaks to corporate law are necessary to achieve meaningful and timely change. Working along with regulation in other areas of the law, corporate law can help transform corporate acts away from a solitary focus on shareholder wealth maximization if it offers mandatory and tailored mandates that guide corporations to prescribed outcomes. We propose therefore legislative changes to re-define corporate purpose more broadly and implement a mandatory system of balancing of shareholder and stakeholder interests by corporate leadership, with an emphasis on protection and advancement of human rights and environmental considerations