On the divergence of interest, Berle and Means' central questionis,
Means The thesis.entrusted performers.
There I engage, specifically, with social contract models of the corporation which try to derive the corporate purpose from an analogy between corporate stakeholders and the citizens of a state. The problem with this approach is that a ground for common agreement, across stakeholder groups with diverse sets of interests, is extremely difficult to find. Take, for example, the interests of customers as opposed to those interests of employees – a tension which goes to the heart of sweatshop labour controversies. Here, the corporation cannot be understood, as stakeholder theory would have it, as a mutually beneficial compromise between different groups of interest. My book concluded with the suggestion that no defensible arguments have yet been given for the extension of corporate membership beyond shareholders. I argue at the same time, however, that the corporation should not be identified with the shareholders, simply as an aggregate of individual investors, but only insofar as they have a single artificial will as members of the body corporate. In other words, insofar as they have a corporate will. What this means in practice is that individual shareholders can participate in the determination of the corporate will by voting on decisions taken in general meetings. If you own 10% of the shares in a company, you don’t own 10% of the corporate assets but 10% of the voting rights.
Did you find this definition of BERLE-MEANS THESIS helpful?
We can certainly debate the ethical standards of shareholders and we should certainly hold boards of directors accountable to these. UN initiatives such as the Global Compact and the Principles for Responsible Investment, or the Global Reporting Initiative, come to mind in this connection. Ethical arguments can help us establish the broad purposes that ought to be pursued through the corporate form beyond, or perhaps to some extent instead of, traditional financial performance objectives. This approach is preferable to the stakeholder approach precisely because it has an answer to the question of whose interests the corporation exists to serve. I’m happy to elaborate on this later but for now I’ll hand over.