241 Twelve recommendations.

Based on this theoretical approach to the issues identified in Dutch corporate law, I have articulated twelve recommendations for the inclusion of social and ecological interests in corporate governance.1 In general, I recommend that the board should pursue durable success defined as an evidence-based public purpose, through profitable value creation and in alignment with the needs and limits of its environment. In the weighing of social and ecological interests against other private interests, the board should be guided by the existing principle of reasonableness and fairness (redelijkheid en billijkheid). I recommend to extend this general principle of fairness to prevent objectionable harm to the resilience and integrity of larger ecosystems, in order to preserve their continued provision of the ecosystem services on which the corporate enterprise and others depend. Such general principles could be further specified in virtuous best practices for dealing with environmental issues in a preferred and excellent way, articulated in collaboration with external stakeholders, scientific experts and representatives of civil society.

In my view, the specific responsibilities of the board for systemic risk management and supply chain due diligence should similarly be guided by the resilience of its own corporate ecosystem and the larger ecosystems in which its enterprise is embedded. By closely monitoring the social and ecological aspects of its corporate activities, the board is able to gain a systemic understanding of the needs and limits of its environment to continue flourishing and to preserve its resilient capacity for adaptation to change.

In relation to disciplining board autonomy, I recommend that the role of shareholders in corporate governance should be maintained but with the addition of binding stewardship responsibilities. Such binding shareholder stewardship should align the exercise of governance rights by shareholders with the general responsibility of the board to ensure durable success for the corporation as a whole. By thus decoupling the ownership of shares from the pursuit of partial shareholder interests in corporate governance, shareholders remain free to trade their shares in the global market for corporate control while controlling shareholders remain bound by the durable success of the corporation. As such, a binding form of shareholder stewardship overcomes the threat of a hostile takeover at the expense of social and ecological strategies.

Meanwhile, other mechanisms may be needed to discipline the extensive autonomy of the board over the public and private interests involved in its corporation. In relation to stakeholder engagement, I recommend that the board should have a binding duty to establish a stakeholder policy in which boards identify relevant stakeholders and account for the way in which they have considered their interests in their decisions. Stakeholders in turn should be granted rights to engage with the board based on their identification in this stakeholder policy. Their engagement should be similarly guided by the shared aim of durable success for the corporation as a whole. Additionally, I recommend that the government should be justified in interfering in extreme situations of mismanagement in which the board pursues a strategy which severely threatens the public purpose of the corporation or the needs and limits of its environment. Such governmental intervention should only be used as a final remedy when other less intrusive forms of disciplining board autonomy have failed.

Finally, board accountability for its interference with social and ecological interests should be organized through binding self-assessment as part of an internal corporate conscience. To that end, I recommend that the supervisory board should be allocated with a dual responsibility both to assist the executive board in pursuit of the shared aim of durable success and to conscientiously evaluate board decisions based on its own engagement with the social and ecological aspects involved in its corporation. This dual responsibility of the supervisory board implies a more extensive science-based mandate through specific sub-committees, such as the internal audit committee. Additionally, I recommend that the composition of the supervisory board should reflect the necessary expertise and experience capable of representing the social and ecological interests involved in the corporation. In my view, such capacity-building for the supervisory board fits with the ongoing professionalization of the supervisory board and the convergence towards a one-and-a-half tier governance model.

I further recommend that the disclosure of the self-assessment by both the executive and supervisory boards should be organized in a spirit of collaborative learning with external stakeholders and experts. On the one hand, both the executive and supervisory boards should account for their self-assessment and conscientious evaluation in their annual statements. Such conscientious accounting of their considerations should include reference to the general need for efficiency, fairness and resilience and the shared best practices developed in collaboration with external stakeholders and experts. Such an open disclosure of the considerations underlying board decisions allows external stakeholders to evaluate the legitimacy of their interference with social and ecological interests and to hold them accountable for such interference. Meanwhile, the collaborative spirit of disclosure should allow boards to share insights concerning social and ecological problems in their corporate ecosystem for which they have no responsibility. Instead of unilaterally holding boards accountable for all of the social and ecological problems concerned, stakeholders and other representatives of civil society should approach board accountability as part of a shared responsibility for finding workable solutions to overcome the social and ecological problems faced by a specific corporation in its unique circumstances.

All in all, I argue that these recommendations provide a comprehensive framework for guiding corporate legal reform towards the inclusion of social and ecological interests in corporate governance. The aim of these recommendations is to provide an integrated approach towards social and ecological corporate governance, honouring the different aspects according to which modern corporations are constituted. Although variations in the actual adoption of individual proposals for reform are possible, I argue that corporate legal reform as a whole should honour the complementarity of insights offered by the three dominant perspectives in Dutch corporate legal theory. By articulating these recommendations, I have attempted to contribute to that larger aim of establishing an integrated framework for reform towards social and ecological corporate governance.