Other-constituency theories and firm governance: is the benefit corporation sufficient?

Abstract

Stakeholder theory creates a core conflict between managers in publicly held corporations and their boards of directors. Benefit corporation legislation recently adopted in 31 states attempts to address this conflict between shareholder primacy doctrine and stakeholder theory. While benefit corporation statutes offer improvement over traditional corporate structure for firms operating according to instrumental stakeholder theory, they do not fully support the ends of normative stakeholder theory or alternative normative other-constituency approaches, such as recently introduced common good models of the firm. Managers choosing to employ normative other-constituency approaches may choose to put benefit corporation regulations to use in the states where these tools are available, but they will continue to be faced with conflicts between benefit corporation structure/governance and applying normative other-constituency approaches on a day-to-day basis in their operations.

The transition towards benefit corporations: What are the roles for stakeholders?

“…Moreover, the study responds toShe and Michelon's (2023) call, offering a focus on the BC characteristics and stakeholder management and engagement activities. Furthermore, our work can sustainJonsen's (2016) claim regarding the need to investigate in greater depth the role of stakeholders in BCs through stakeholder theory,…”

“…However, the instrumental approach appears peculiar of BCs, as asserted by some literature (Jonsen, 2016). Our study further suggests that the decision about which stakeholder groups engage directly appears to be led by the perceived strategic relevance of the different stakeholder categories, and also by the feasibility and opportunity of their actual direct engagement right from the preliminary step of definition of the bylaw.…”

“…However, Agle et al (2008) showed how attention towards stakeholders is motivated to create common good and ethical purposes drive an enterprise's actions (Agle et al, 2008). On the one hand, the BC should combine, without conflict, the creation of profit and increasing the common good (Jonsen, 2016). Poponi et al (2019) analysed BC certification, showing how stakeholders have different roles that stimulate BCs to activate a virtuous path towards sustainable actions.…”

Organizational Identity Formation in Alternative Organizations: A Study of Three Benefit Corporations

“…Finally, BCs’ identities are formed on a set of values that are significantly at odds with mainstream business and industry standards. BCs operate in a system where shareholder primacy has become a matter of course and is supported both by corporate law and popular discourse (Jonsen, 2016). This is true despite four decades of development of the social responsibility movement (see, for example, Carroll & Shabana, 2010).…”

Philanthropy and the For-profit Corporation: The Benefit Corporation as the New Form of Firm Altruism

“…; Kahneman and Tversky ( 1984 ), p 341 et seq. ; Kahneman ( 2011 ). In general, on behavioural law and economics see Thaler ( 1996 ), p 227 et seq.…”