Corporate Governance, Corporate Responsibility and Law: Shareholder Primacy and Other Stakeholder Interests

In this note a few comments are made as to how it happened that shareholders were generally treated as the owners of the company and how that has now been vigorously challenged as an overstatement. Whilst the law in Australia, at least, still treats the duties of the directors of a company as being owed to the company as embodied by the current and future shareholders, it is now generally conceded that other stakeholders believe they have a very real interest in the company. It will also be illustrated that there are more and more official recognition of other stakeholders, especially in the European Union (EU). It will be shown that it is unlikely that the role shareholders play in corporate governance will diminish soon. Shareholder primacy is still underpinning our corporate law and corporate governance model. However, should we simply accept that model or should we work towards reflecting the practical reality that corporations exist and thrive because there are vitally important stakeholders other than the shareholders?