181 Historic versus contemporary partnership perspective.

The first dominant perspective in Dutch corporate legal theory views the corporation as a partnership between contracting partners in a free market environment. For the purpose of achieving a nuanced understanding of the partnership perspective, I distinguish between the theoretical core propositions of the historic partnership perspective and the contemporary partnership perspective as it has come to be perceived in contemporary corporate legal theory. While the historic conception of the partnership perspective mainly focuses on the contractual nature of the corporation, the contemporary conception has narrowed its focus to the nature of the corporation as an instrument of shareholders. This shift in focus is closely related to the adoption of economic theories such as agency theory and transaction cost economics which need not necessarily be the sole approach of the partnership perspective.

In theory, the historic partnership perspective views the corporation as a nexus of contracts between all contractual stakeholders of the corporation.1 In this view, the legal corporation is constituted by the contractual freedom of each stakeholder to join or leave the corporation according to the terms negotiated between them and the other partners of the corporation.2 The authority to govern the corporation rests with all partners together, who are considered to delegate the management of the corporation to the executive board. The executive board becomes responsible for guiding the negotiations between all contractual stakeholders of the corporation. Potential examples of partners in the corporation include investors of financial capital as well as other strategic stakeholders, such as employees, customers or the suppliers of crucial resources. Theoretically, the partnership perspective allows for any of these stakeholders to be granted the authoritative governance rights of the corporation, potentially including social and ecological stakeholders.3

However, pursuant to the contemporary adoption of economic theories in the partnership perspective, corporate governance has largely become a shareholder-oriented affair in which the board is considered to be a mere agent in the service of its shareholders.4 Consequently, the contemporary partnership perspective leaves (very) limited room for the explicit inclusion of social and ecological interests in corporate governance.5 In fact, the externalization of social and ecological interests from board decision-making has become a key aspect of the contemporary partnership approach.6 By orienting corporate governance towards the narrow focus of efficient value creation, the contemporary partnership perspective suggests that the market mechanism is enabled to optimally distribute societal resources and create the highest possible societal welfare.7 By thus referring issues related to the distribution of social and ecological resources to the market mechanism, the contemporary partnership perspective unleashed the creative potential of individual entrepreneurship while externalizing difficult and potentially polarizing societal discussions about the best distribution of resources from corporate governance.8 The contemporary partnership perspective therefore provides strong arguments against the explicit inclusion of social and ecological interests in corporate governance based on the large degree of individual liberty and the unprecedented economic value that it creates.

For social and ecological interests, the main implication of the contemporary partnership perspective is that they only become relevant for corporate governance as instrumental commodities or strategic partners in the process of value creation.9 As a result, natural environments only become partners of the corporation as instrumental providers of natural resources, such as clean water or palm oil, and social communities only become strategic partners of the corporation as providers of labour or as consumers of products. Additionally, social and ecological problems become relevant for corporate governance only as business opportunities for new product development or market growth, even if these problems are created by a commodification of the social and ecological environment in the first place.10 As an extreme example, polluted rivers may become relevant for corporations first as instrumental providers of water for industrial production and then, after being polluted by such production, as a business opportunity for the production of purified water.

In view of these problematic implications, a closer look at the theories resembling the partnership perspective suggests that a more nuanced approach may exist allowing for the explicit introduction of social and ecological interests in the governance of corporate partnerships. Such a nuanced approach to the partnership perspective would allow for the contractual nature of corporations to remain part of the proposals for legal reform. In my view, a reappraisal of the partnership perspective is imperative since viewing the corporation as a contractual partnership addresses fundamental values of corporate cooperation, particularly the individual liberties associated with freedom of contract.11 A key implication of this contractual approach is that corporations are perceived as fundamentally private organizations with no legitimacy to interfere with larger non-private interests.12 In essence, the power of corporations and their boards is restricted to the private interests of their partners. As opposed to public government from which citizens cannot exit, stakeholders of the corporation are free to enter or leave the corporate partnership for other alternatives in a competitive market environment. Based on this freedom to join and exit the corporation, the partnership perspective emphasises the private constitution of corporations and its lack of public legitimacy to interfere with larger social and ecological interests. To put it otherwise, the partnership perspective emphasises that allocating responsibilities to corporations for social and ecological interests requires a clear public mandate to prevent corporations from overstepping their limited constitution as a private cooperation between free stakeholders.13

The contractual approach of the partnership perspective therefore provides relevant insights which merit further consideration in any course of corporate legal reform. In view of this, I argue that the contemporary approach unnecessarily narrows down two central aspects of the partnership perspective. The first aspect relates to the notion of partners involved in the corporate partnership and the question whether this notion should be narrowed down to investors of financial capital only. The second aspect involves the terms being negotiated by the partners of the corporation and particularly whether those terms need to be reduced to the one-dimensional metric of market price. I will now consider the potential for a more nuanced approach to these two central aspects in more detail.