233 Prospectus, public accountability or shared learning?

All of the perspectives in Dutch corporate legal theory seem to rely on reporting as a mechanism for board accountability, though with different aims and implications for the role of reporting in corporate governance. For the partnership perspective, I argue that the aim of the annual report is mainly to provide a prospectus for the existing and prospective stakeholders of the corporation, thereby allowing them to assess whether they want to partner or continue partnering with the corporation.1 Particularly for shareholders, the report is meant to provide an overview of the financial health of the corporation and its ability to deliver sustained growth and continued value creation. The content of the report revolves around the capacity of the corporation to deliver continued and profitable value to its partners, which may involve a reference to identified risks challenging future performance.2 Instead of focusing on the impact of the corporation on public interests or its environment, the focus is on the financial statement included in the annual report, which provides an overview of the financial performance of the corporation itself.3 For the partnership perspective, the annual report becomes a form of unilateral board accountability in which the board unilaterally accounts for the way it has fulfilled its responsibility towards the partners of the corporation.4 The recipients of the report, including shareholders as well as other stakeholders, are free to judge the report according to their own expectations from the corporation and to decide whether to join, stay with, or leave the corporation. All in all, the partnership perspective orients the role and boundaries of reporting mainly towards the expectations of the strategic stakeholders, reflecting the responsibility of the board towards the partners of the corporation.

By contrast, the institutional perspective relies on the annual report as a tool for the board to account for its broader governance of an institution perceived to be authored by society and all stakeholders.5 The focus shifts from reporting merely on the performance of the corporation itself towards its broader impact on relevant public and stakeholder interests. As a result, the statements by the board and the supervisory board become a more central part of the annual report for the board as a whole to account for its decisions in relation to larger public and stakeholder interests. Meanwhile, the external process of publishing the annual report is expected to reflect the internal process of corporate decision-making, in which stakeholder interests are expected to be integrated.6 Building on the earlier discussed suggestions for a binding stakeholder policy, the annual report should account for the way in which the board has engaged with relevant stakeholders and their interests.7 This extends the unilateral nature of reporting towards a more engaging form of reporting in which the report is a reflection of continuous stakeholder engagement. I would therefore argue that the institutional perspective perceives disclosure as a form of external board accountability towards society and all stakeholders, instead of merely addressing existing and prospective strategic partners of the corporation. Consequently, the boundaries of reporting are extended to reflect the broader responsibility of the board towards the public constitution of its corporation.

For the ecosystem perspective, I would argue that disclosure becomes part of the larger process of science-based ecosystem stewardship in collaboration with civil society and localized stakeholders.8 The focus shifts further towards leveraging reporting for a stakeholder dialogue aimed at constructively seeking workable solutions to social and ecological problems faced by the corporation. Instead of perceiving the report as a unilateral account by the board for critical evaluation by its stakeholders, reporting becomes embedded in a larger process of collaborative learning about social and ecological problems in mutual partnership with relevant experts and stakeholders.9 In my view, the development of requiring boards to report on their supply chain due diligence, systemic risk management and other insights gathered by their internal monitoring systems reflect this science-based and data-driven approach of the ecosystem perspective.10

As a result, the boundaries of reporting may extend beyond the responsibility of the board towards the needs and limits of its environment. Boards may discover important facts or problems in their corporate ecosystem and the larger ecosystems in which their enterprise is embedded, without being responsible for overcoming those problems. In my view, the ecosystem perspective decouples the board’s responsibility to share insights about social and ecological problems discovered in its corporate ecosystem from questions about board responsibility for actively solving those problems. The question concerning the board’s responsibility for social and ecological problems is guided by its general responsibility to achieve durable success for its corporation in alignment with the needs and limits of its environment to maintain its resilience and to continue flourishing.11 Not all social and ecological problems discovered through its internal monitoring systems may necessarily fall within this general responsibility for durable success within the limits of its environment. Meanwhile, the board’s responsibility to share relevant insights is part of a larger shared responsibility of both boards and their stakeholders to learn about the needs of larger ecosystems and to find workable solutions for preserving their resilience.12 As such, the ecosystem perspective allows for the role and boundaries of reporting to extend beyond the general responsibility of the board towards social and ecological interests.