Beyond shareholders versus stakeholders: Towards a Rawlsian concept of the firm

This paper critiques the principle of shareholder value and offers an alternative paradigm. We consider different theories describing the corporation and its relationship with shareholders, concluding that much of the modern academic discourse on corporate governance centres around the notion of the firm as a contractual arrangement. We provide a full critique of shareholder primacy from an economic as well as a moral perspective, which includes a focus on Rawls. An alternative contractarian paradigm is offered, one that is based on the concept of the corporation as a ‘social union.’ This characterisation justifies participation of a wider group of stakeholders in the governance of a corporation, and we make a distinction between electoral and moral constituents. A role for the application of the principles of deliberative democracy is also discussed.

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