Planetary Boundaries and Corporate Reporting: The Role of the Conceptual Basis of the Corporation

Abstract

There is a broad call to integrate planetary boundaries and life-cycle based reporting into accounting theory and reporting standards. Although many practitioners back this call, including insurers, shareholders with a long-term orientation, and company law specialists who suggest that the inclusion of long-term stakeholder interests is necessary to counter both corporate and systemic risks, it remains unanswered. We argue that dominant assumptions about the status and architecture of corporations in corporate governance theory stand at the centre of this unanswered call in accounting theory and practice. As the status of the public corporation is interpreted as a nexus of contracts and its architecture as a restricted dyadic relation between ‘principals’ and ‘agents’, the object and audience for corporate reports are restricted to a very specific set of actors, interests and time-horizons. We argue that this conceptual setup unduly restricts notions of accountability and is connected to a specific notion of political economy. A broadening of reporting standards needs, therefore, to be accompanied by a critical assessment of the assumed object and audience of reporting in corporate governance theory.

Non-financial reporting and corporate governance: a conceptual framework

“…Our review of the qualitative literature on context and regulation found 29 papers that considered NFR in particular contexts or regulatory settings. Of these, 13 were theoretical papers, dealing, for example, with the genealogical history of narrative reporting in the UK (Chahed, 2021), calling for harmonisation of NFR standards (Adams and Abhayawansa, 2022) or discussing the role of the modern corporation in accountability for NFR (Veldman and Jansson, 2020). Content analysis was a popular approach, with 11 papers exploring the impact of certain regulations or reporting changes on corporate reports, for example, the nature of IR reporting (Zinsou, 2018) or reports on national ESG policies (Camilleri, 2015).…”

“…While theory discovery studies start from preliminary theoretical developments and rely mainly on empirical insights, theory refinement studies frame on a more robust theoretical background. In the latter case, the researcher has selected which theoretical lens to use in investigating the research phenomenon (Vaivio, 2008). Qualitative research is suited to exploring complex causal relationships and subjective issues, investigating various interactions among variables with scant prior research, understanding how social actors use and react to accounting, and examining social change and developments in organisational behaviour (De Villiers, Dumay and Maroun, 2019).…”

“…Qualitative research is well-suited to capture significant insights due to its inclination towards exceptions and novel interpretations (de Villiers et al, 2019). Qualitative researchers are theoretically sensitive, and they take advantage of the contexts under investigation and extended involvement in the research setting (Vaivio, 2008) focus on detecting significant non-financial issues and providing organisations with insights on how they should be managed and reported (De Villiers and Hsiao, 2018). However, undertaking qualitative research is tough, time-consuming, and sometimes frustrating.…”

“…Participants selected for interviews may not be motivated or have enough time available. Also, the interpretations of the empirical research may not provide enough theoretical novelty (Vaivio, 2008). Recently, Covid-19 restrictions have severely impacted access to the traditional data and data sources used by qualitative researchers (Molinari and De Villiers, 2021).…”

The Contest on Corporate Purpose: Why Lynn Stout was Right and Milton Friedman was Wrong

“…Lynn Stout did not live to see the unravelling of the doctrine of shareholder primacy and the potential abandonment of the maximisation of shareholder value as the central driver of US corporations, but this now does appear, to a degree at least, to be occurring in slow motion (Clarke, 2015;. The growing emergence of the Social License to Operate, the open debate on the Purpose of the Corporation (a company's fundamental reason for being), the revision of the core principle of the US Business Roundtable around corporate responsibility, and interest around the world in redefining the social and environmental obligations of corporations in the context of the devastating potential impact of climate change is beginning to suggest the absolute reign of shareholder primacy is coming to an end (Clarke, 2007;Veldman & Jansson, 2020).…”