236 Which standards for self-assessment?

In order to articulate standards for a comparable self-assessment, I propose to consider in more detail the approach taken by each perspective in Dutch corporate legal theory. To that end, I will build on the earlier discussions about the definition of durable success and the standards for the weighing of interests involved in corporate governance. In the earlier discussion on the standards for the weighing of interests by the board, I recommended to extend the principle of fairness in Dutch corporate law to social and ecological interests.1 Such an extension of the principle of fairness would require boards to interfere with social and ecological interests in a fair and equitable way, without causing objectionable or disproportionate harm to the integrity of their environment. In accordance with the ecosystem perspective, this prevention of harm to the environment refers to the need for the resilience of both the corporate ecosystem and the larger ecosystems in which it is embedded to continue delivering the ecosystem services on which the corporate enterprise and others depend.2 As I proposed earlier, the central standard for corporate decision-making should therefore be to encourage the durable success of the corporation, aligned with the need for profitability as well as the needs and limits of its larger environment.3 I further proposed to complement such a general standard by including virtuous best practices in relation to social and ecological interests in the Dutch Corporate Governance Code.4 Such virtuous best practices would enable an articulation of the preferred normative response expected from boards to issues in their environment, particularly if they are established in dialogue with relevant stakeholders, scientists and other representatives of civil society. Building on these earlier discussions, I will now consider in more detail the approach of each perspective in relation to the role of self-assessment in board accountability and the standards according to which such self-assessment should be conducted.

For the partnership perspective, the board is mainly required to assess how its decisions have encouraged the performance of its corporation to create value for its partners.5 The standard for such self-assessment revolves around the efficiency and competitiveness of its strategy and business model with reference to wider business practices and financial metrics. The reference to financial metrics particularly allows external stakeholders to analyse and evaluate the corporate performance achieved by the board in comparison to other corporations.6 I therefore argue that the comparable standard for self-assessment proposed by the partnership perspective revolves around the performance of the corporation with reference to quantified financial metrics and common business practices.

In turn, the institutional perspective emphasizes the public constitution of the corporation, orienting the standards for corporate governance towards public interests and a general principle of fairness.7 Consequently, the self-assessment required from the board and supervisory board should be guided by these public interests, captured in binding legal rules, generally accepted public values and the individualized public purpose of a corporation.8 The statements by the board and the supervisory board gain prominence in their annual disclosure as a tool for publicly accounting of their decisions and supervision with reference to these general public interests. In my view, the standards for self-assessment extend beyond strict compliance with binding legal rules and include references to general public values such as those contained in the SDGs, ESG-criteria or other non-binding legal initiatives.9 The institutional perspective views all corporations as members of a larger political community in which they are expected to participate as good corporate citizens.10 The self-assessment of the board should reflect that membership in society, captured in their individualized notion of the public purpose served by their corporation. I therefore argue that according to the institutional perspective comparable self-assessment should be guided by binding legal rules, general public values and the individualized public purpose of their corporation.

In contrast to the partnership and institutional perspectives, the ecosystem perspective is more focused on the specific circumstances in which a corporate enterprise operates.11 As a result, the self-assessment of the board becomes more individual and is guided less by general rules or quantifiable and comparable metrics. Yet, the ecosystem perspective does offer comparable standards for such self-assessment. In general, the ecosystem perspective requires the board’s decisions to strengthen the resilience of its corporate ecosystem in response to unexpected changes and to preserve the resilience of larger ecosystems to continue its provision of ecosystem services.12 Ecological resilience therefore becomes a fundamental standard by which to evaluate the self-assessment of the board. How did their decisions contribute to the need for resilience in their corporate ecosystem and the larger ecosystems in which it is embedded? In addition to this fundamental standard, the ecosystem perspective offers opportunities for articulating specific best practices regarding the most excellent and virtuous ways in which to respond to social and ecological challenges.13 Such virtuous best practices bridge the gap between the need for comparable standards and the need for acknowledging the specific circumstances in which board decisions are interfering.

As suggested earlier in relation to the responsibility of the supervisory board for a conscientious reflection on the impact of board decisions, I contend that the ecosystem perspective suggests a general shift from evaluating board decisions based on measurable impacts towards focusing on the process of decision-making itself.14 Since social and ecological performance is less easily captured in quantifiable and comparable metrics than for example financial performance, the nature of board accountability through disclosure is more qualitative than quantitative.15 The focus shifts towards evaluating the conscientious considerations of both the executive board and the supervisory board on which their decisions are based. Such a disclosure of conscientious considerations invites stakeholders to engage in dialogue with the board about these considerations, instead of merely criticizing board decisions based on their performance and impact. As suggested above, board accountability through disclosure then becomes part of a larger process of collaborative learning in collaboration with stakeholders and experts from civil society.16 All in all, this approach suggests that the self-assessment of the board should be evaluated by reference to a general orientation towards ecological resilience and virtuous best practices, in a spirit of collaborative learning together with stakeholders.