224 Stakeholder engagement and governmental intervention.

The allocation of responsibilities to the board in relation to social and ecological interests implies an extension of board autonomy in weighing and interfering with those interests. As a consequence, the question arises how such board autonomy should be balanced and checked and particularly who should be able to engage with the board on behalf of those interests. Although board autonomy remains embedded in the internal system of checks and balances provided by the supervisory board and the general meeting of shareholders, additional remedies may be merited to check board autonomy in relation to larger social and ecological interests. In my view, such remedies should take the form of a binding stakeholder policy and grounds for governmental interference in the situation of severe mismanagement at the expense of public interests.

In relation to the engagement of stakeholders, I argue that the popular dichotomy of shareholder-oriented versus stakeholder-oriented corporate governance deserves a more nuanced reconsideration. In my view, the fundamental premises of the partnership perspectives do not necessarily propose a narrow view of shareholder-oriented corporate governance but allow for a broader set of stakeholders to be included in corporate governance. In principle, the partnership perspective suggests that boards should govern their corporation in the interest of all stakeholder interests. The partners of the corporation are perceived to have the ultimate authority in corporate governance. While the allocation of governance rights to a single group of partners (such as investors of financial capital) may be justified, the corporation as a whole should still be governed for the benefit of all partners committed to the corporation. The perceived opposition by the partnership perspective towards stakeholder-oriented corporate governance therefore merits reconsideration.

In my assessment, all perspectives therefore seem to allow for stakeholders to receive rights to voice their interests to the board. Although the extent of such engagement rights may differ per perspective, I argue that the minimum level of engagement expected by all perspectives is a binding form of stakeholder policy in which the board is required to engage with relevant stakeholders and to identify their interests. By allocating such a binding duty of stakeholder engagement, external stakeholders are able to voice their interests and engage with the board on the best way to integrate their interests in the strategy towards durable success. In my view, such stakeholder engagement should be aligned with the shared aim of durable success similar to the allocation of stewardship responsibilities to shareholders.

In addition to such a stakeholder policy, corporations may voluntarily design a framework for the internal representation of stakeholders in corporate governance, for example through an internal stakeholder council. While Dutch corporate law may provide a facilitatory framework for such internal representation, corporations should be free to adopt a form which best fits their specific circumstances. All in all, such an approach to stakeholder engagement would provide stakeholders with the minimum rights to engage with the board and voice their interests while enabling boards to maintain sufficient autonomy for their pursuit of a successful strategy in a competitive market environment.

In addition to stakeholder engagement, the extensive board autonomy in relation to larger public interests may merit some form of governmental intervention in the case of severe mismanagement at the expense of public interests. The adoption of stewardship responsibilities for shareholders limits the extra-legal disciplining force of the global market for corporate control. While this is expected to benefit social and ecological interests, such a weakening of the global market for corporate control as a disciplining mechanism for corporate boards raises the issue of whether other ultimate remedies are needed to discipline extreme forms of corporate mismanagement. Particularly in relation to the mismanagement of public interests, the possibility for stakeholders to exit the corporation as an ultimate remedy is limited due to the inevitable embeddedness of corporations in society and their natural environment. Some stakeholders simply cannot exit the corporation and are therefore without a remedy to escape from extreme corporate mismanagement. In such instances, I would argue that governmental intervention may be merited to protect the public interests involved in the corporation. Such intervention could be grounded on existing corporate legal rules, particularly the right of the public prosecutor to request the dissolution of a corporation on behalf of the public interest.

This reappraisal of the rights of the government to interfere in corporate governance would offer an ultimate remedy in response to extreme forms of corporate mismanagement. In my view, such governmental intervention should only be merited if board decisions provide a severe threat to the evidence-based public purpose of the corporation or the needs and limits of the environment in which the corporation operates. By limiting the grounds for governmental intervention to such severe threats to public interests, priority is given to limit board autonomy through the internal system of checks and balances and the rights of engagement or the freedom of exit provided to stakeholders. Governmental intervention should therefore be perceived as a final remedy when other, less intrusive mechanisms to discipline board autonomy have failed.