214 Reappraising the partnership perspective.

In my assessment, all three perspectives in Dutch corporate legal theory allow for an extension of stakeholder engagement by the board beyond shareholders and employees. However, the grounds provided for such an engagement differ and impact the way in which such stakeholders could potentially be included in corporate governance. Particularly the partnership perspective is often perceived to be in conflict with forms of stakeholder-oriented corporate governance.1 In relation to the inclusion of social and ecological interests, I argue that a more nuanced approach to the partnership perspective is required.2

The partnership perspective as I understand it does not have any principled objections against extending the range of partners involved in corporate governance, as long as the board remains oriented towards efficient value creation in a competitive market environment.3 Instead of being shareholder-oriented, I argue that the partnership perspective takes an efficiency-oriented approach towards corporate governance.4 Such an efficiency-oriented corporate governance requires boards to consider all strategic interests that are relevant for the continued long-term performance of the corporation as a market actor in a competitive market environment. To some extent, this resembles the resilience-oriented approach of the ecosystem perspective, by implicitly recognizing the need for the board to consider those interests that are necessary for building the resilience of the corporation to adapt to changing circumstances.5 In contrast to the ecosystem perspective, the partnership perspective leaves the resilience of larger ecosystems to the functioning of the market mechanism and to governmental intervention if the market fails to achieve greater resilience.6 By so doing, the partnership perspective allows the board to narrow its focus on preserving the capacity of its corporation to continue performing in a changing market environment.

The partnership perspective therefore provides grounds for the board to engage with any stakeholder that is relevant for the long-term performance of the corporation.7 By viewing corporations as a nexus of contracts between individual partners, the partnership perspective mainly focuses on those stakeholders that have a contractual relationship with the corporation, such as suppliers, creditors and customers.8 In my view, the partnership perspective does not necessarily provide any objections against extending such engagement to indirect contractual stakeholders, such as strategic stakeholders throughout the supply chain.9 Such an extension may be merited and even required for achieving continued and efficient value creation in a competitive market environment. As a result, the identification of stakeholders for board engagement relies on their strategic relationship with the corporation.

In relation to the representation of those stakeholders in corporate governance, the partnership perspective principally relies on market negotiation concerning the terms of engagement between the corporation and its stakeholders.10 However, the partnership perspective allows for any partner to receive governance rights if such market negotiation fails to include its interests, for example because of the open-ended nature of the costs burdened by those stakeholders.11 On this basis, strategic stakeholders such as customers, suppliers or even the employees of third-party manufacturers may have grounds for being allocated with governance rights.12 Meanwhile, such an inclusion of heterogenous interests in corporate governance introduces a tension with the need for the board to pursue a narrow focus of efficient value creation in a competitive market environment.13 The inclusion of potentially conflicting stakeholder interests implies the need for aligning those interests through deliberation, potentially distracting the board from its focus on value creation.14 Furthermore, such an alignment of interests may extend the responsibility of boards to forms of public-policy making for which they have no explicit public legitimacy.15

In my understanding, the partnership perspective overcomes these challenges by envisioning a corporate governance structure in which the interests of the partners are closely aligned with the need for efficiency and long-term value creation in a competitive market environment.16 Although the partners may disagree on the best way to achieve this, the central objective of the corporation to pursue efficient value creation should be agreed upon by all partners. Inclusion of other stakeholders is therefore only possible in relation to their strategic interest in achieving efficient value creation in partnership with the corporation. This approach resembles the forms of stakeholder governance proposed by the institutional perspective, indicating that the partnership perspective may accommodate such proposals for the inclusion of stakeholders in corporate governance if they are aligned with the general objective of the corporation to achieve efficient value creation.17

With regard to non-strategic social and ecological interests, the partnership perspective provides two grounds for their inclusion in corporate governance, namely the potential of involuntary harm to externalized stakeholders or the failure of the market to include those interests in its pricing mechanism.18 In those situations, governmental intervention is merited to overcome such market failure. In relation to social and ecological interests, I would argue that both grounds apply, suggesting that interventions are allowed in specific circumstances to overrule the contractual nature of corporate governance.19

In my view, the circumstances in which the market mechanism fails to incorporate social and ecological interests correspond with the circumstances in which the ecosystem perspective requires the board to consider the resilience of larger ecosystems.20 The ecosystem perspective suggests that social and ecological interests enter corporate governance when corporate activities threaten the capacity of larger ecosystems to continue to provide ecosystem services on which corporations and others depend. Such an inclusion of larger ecosystem resilience occurs, for example, when corporate activities contribute to tipping points in planetary ecosystems or create systemic risks threatening the collapse of individual social or ecological ecosystems.21 In those circumstances, the larger ecosystem either faces the potential of being involuntarily harmed by the corporation or burdening costs which are externalized from the market mechanism. As such, the resilience-oriented approach of the ecosystem perspective may be able to complement the efficiency-oriented approach of the partnership perspective, in relation to those interests which face the potential of being involuntarily harmed or otherwise fail to be included in the negotiation of the market mechanism.

In sum, the partnership perspective provides grounds for at least requiring the engagement of strategic stakeholders by the board, both directly and indirectly throughout their supply chain. In principle, such engagement occurs through the negotiation of the market mechanism. If such negotiation fails to include their strategic interests, then an allocation of governance rights is merited as long as the exercise of such rights is aligned with the general objective of the corporation to create efficient value creation in a market environment. Such an allocation of governance rights resembles the formal inclusion of stakeholders in corporate governance as proposed by the institutional perspective. Further governmental intervention may be merited when the market fails to include harm to the social and ecological environment in its pricing mechanism. Such a prevention of market failure corresponds with the approach of the ecosystem perspective to include the resilience of larger ecosystems in corporate governance. The partnership perspective therefore provides room for accommodating the suggestions by the other perspectives.