Corporations and the Public Interest:The Public Interest Model of the Corporation: An Institutional Perspective on the Corporate Purpose Question

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Abstract

ABSTRACTUniversity: The University of ManchesterName: Bonaventure OtiDegree: Master of PhilosophyTitle: Corporations and the Public Interest. The Public Interest Model of the Corporation: An Institutional Perspective on the Corporate Purpose QuestionDate: 2016The thesis argues that the proper purpose of the large business corporation is the public interest. By large business corporation is meant the corporations with tradable shares in the capital markets.The debate about the corporate objective function is one that is almost as old as the modern corporate form. It is an enduring question that has troubled generations of corporate law scholars. The issue came up for discussion by the Company Law Review, which drafted a report leading up to the enactment of the UK Companies Act 2006. A halfway solution, that is, the enlightened shareholder value approach was settled for, and is reflected in section 172 of the Act.The basic question of the purpose of the corporation remains, even though the dominant view on the question in academic discourse, as well as in the business and popular press, is that corporations (are to) maximize profits for their shareholders. The novel ‘enlightened shareholder value’ norm does not seem to have made much impact in changing minds and practices, that is to say, in achieving the professed aim, namely, to make corporate directors and managers more responsive to the interests of non-shareholders. The belief sustaining the shareholder value norm that shareholders are the owners of their companies persists.The shareholder primacy doctrine has been subjected to serious criticisms. A stakeholder model blurring into various corporate social responsibility agendas, including, loud public outcries and displays of disapproval of corporate misdemeanours, seem to be on the rise, to counteract albeit indirectly shareholder value norm.The model argued for by this thesis takes a different approach. The purpose of the corporation is sought in the broader context of the corporate enterprise. The public interest model is conceived in an institutional perspective, which sets store in correctly characterising the corporation. The conception of interest as a justifiable claim shows that the shareholders’ interests are reconcilable with the interests of all other stakeholders, and are understood to redound to the public interest.The intellectual contexts of the corporate enterprise, that is to say, economics and ethics are unifiable so as to clarify the proper purpose of the economy. A business ethics distinct from ‘applied’ business ethics (market-failure’s approach), provides the foundation for an ethical corporation. A socially responsible corporation, it is argued, is a moral corporation.

Keyword(s)

the public interest, the corporate interest, economic ethics, corporate ethics, corporate social responsibility, morality of the corporation, corporate objective, corporate purpose, corporate moral agency and corporate moral responsibility

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