211 Towards corporation or ecosystem as a whole?

All three perspectives in Dutch corporate legal theory seem to allow a role for shareholder stewardship, though oriented towards different aspects of the corporation. The partnership perspective perceives shareholder stewardship mainly in relation to the partners of the corporation. In my assessment, the historical development of the partnership perspective revolves around the question of who should be considered as partners of the corporation and, by extension, which of them should be granted governance rights.1 Based on agency theory and transaction cost economics, the contemporary partnership perspective has argued for limiting the notion of partnership to the investors of financial capital based on their homogeneous interest in maximizing the total value creation of the corporation.2 This prioritization of shareholders was argued to achieve the lowest governance costs which would ultimately benefit all stakeholders. As a consequence, the contemporary partnership perspective has been narrowed down to shareholder-oriented corporate governance with shareholders exercising governance rights according to their own interests.3

By contrast, I would argue that the historic partnership perspective allows for a broader view, perceiving all strategic partners as potential recipients of governance rights.4 Additionally, corporate governance is perceived to be in the interest of all strategic partners, even if only a sub-group thereof actually have governance rights.5 The historic partnership perspective therefore seems to imply that the partners governing the corporation should do so with an orientation towards the interests of all relevant strategic stakeholders. In my view, the legal rules oriented towards protecting minority shareholders from an abuse of authority by majority shareholders resemble this implicit logic in the partnership perspective.6 Following this approach, shareholder governance by its nature implies a form of shareholder stewardship oriented towards the interests of all strategic partners in the corporation.7 By thus extending the notion of partnership to all strategic partners of the corporation, shareholders may remain the sole recipients of governance rights but with a specific responsibility to consider all strategic stakeholder interests in the exercise of their governance rights.

Meanwhile, the allocation of governance rights to the investors of financial capital may itself be revisited by allocating governance rights to other stakeholders as well, for example by including them in the general meeting of shareholders. In my view, the partnership perspective does not include any principled objections against such an inclusion of other partners in the governance of the corporation.8 Although shareholders may arguably be the preferred holders of governance rights, the inclusion of other partners such as employees or even customers or suppliers may be equally advocated. To a certain extent, the partnership perspective relies on a cooperative approach to corporations similar to customer cooperatives such as Rabobank or supplier cooperatives such as FrieslandCampina.9 An argument for extending the general meeting of shareholders to other partners of the corporation is therefore not necessarily precluded from the approach of the partnership perspective. In sum, the partnership perspective seems to imply, at the very minimum, a form of shareholder stewardship in which shareholders are required to exercise their governance rights in the interest of all strategic stakeholders. Beyond that, strategic stakeholders could even be allocated governance rights themselves, if further argumentation would prove that such inclusion would be the more preferable mode of governance for the whole partnership. I shall return to this below in relation to the next issue of stakeholder governance.10

The institutional perspective in turn views the corporation as an institution with its own independent interest in its continued existence.11 In my view, the institutional perspective does not imply any principled objections against the preferred position of investors of financial capital in corporate governance, although it does not explicitly suggest any arguments in its favour. The allocation of governance rights solely to shareholders may be accommodated within the institutional perspective, as long as the exercise of these rights is oriented towards the interest of the corporation as a whole. By constituting the corporation in a legal concession from stakeholders and society, the institutional perspective as I interpret it extends the constitutional basis of the corporation beyond just strategic stakeholders to include all moral stakeholders and even society as a whole.12 As a result, the governance of the corporation becomes oriented towards all stakeholders and the public interests by which it is constituted, considered to be encapsulated in the independent interest of the corporation as the overarching whole.13

By perceiving corporate governance in this way, the role of shareholders should be equally oriented towards the interest of the corporation as a whole, which is considered to include their own partial interests. In my view, allowing shareholders to exercise their governance rights merely in pursuit of their own interests does not fit well with the premises of the institutional perspective, as exemplified by the polarized tension between shareholder-oriented governance and stakeholder-oriented governance.14 I would argue that this tension could be overcome by allocating a stewardship role to shareholders, in which the privileged position of shareholders is justified by reference to their alignment with all interests involved in the corporation.15 The institutional perspective would then require shareholders to govern the corporation in the interest of all moral stakeholders and societal interests by which it is constituted. Such an approach would align the role of shareholders with the duty of the board as perceived by the institutional perspective, enabling the board to pursue a strategy which includes all stakeholder interests without the need to prioritize shareholder interests.

In my assessment, the ecosystem perspective equally has no principled objections to shareholders receiving sole governance rights, as long as their exercise of these rights is oriented towards preserving the resilience and integrity of the corporate ecosystem and the larger ecosystems in which it is embedded. The ecosystem perspective perceives centralized governance to follow from the self-organized emergence of the corporate ecosystem in relation to its environment.16 Instead of controlling the functioning of the corporate ecosystem through centralized direction, corporate governance is expected to support and steward its self-organized trajectory. Corporate governance becomes perceived as a form of ecosystem stewardship oriented towards serving the self-organized integrity of the corporate ecosystem and the larger ecosystem in which it is embedded.17

Such ecosystem stewardship involves some form of ecological democracy, through which the values and interests implicit in localized elements of the corporate ecosystem are included in its governance.18 In my assessment, such ecological democracy does not preclude shareholders from being allocated special governance rights in the central governance of the corporation. However, ecosystem stewardship does require that such shareholder governance is oriented towards the needs and integrity of the corporate ecosystem as a whole, rather than being driven by the individual self-interests of shareholders.19 Otherwise, centralized interventions in the corporate ecosystem risk being driven by partial interests at the expense of the integrity of the ecosystem as an embedded part of a larger whole, resulting in a disharmonious relationship with its environment. In many ways, shareholder governance may in fact enable corporate boards to improve their ecosystem stewardship, for example by sharing relevant insights across corporations or by building networks of collaborative learning with other stakeholders around a shared problem domain.20 In particular, large institutional investors may have the resources and, in some instances, the long-term commitment to build capacities for such a collaborative gathering of systemic insights into the relationship between corporations and their larger environment. In sum, I would argue that the ecosystem perspective is not likely to propose any principled objections to shareholder governance as long as it is aligned with the need for ecosystem stewardship in the service of the corporate ecosystem and the larger ecosystems in which it is embedded.