Social and Legal Barriers to a Socially-Focussed Corporate Purpose: A Luhmannian Systems Analysis

Corporate purpose is being reimagined away from profit and shareholder value maximisation, towards a wider, more sustainable, social corporate purpose (SCP), thereby potentially involving a wider range of stakeholders in corporate governance and creating value for wider society. However, it is argued that such a reimagination needs to take account of the embedded nature of the shareholder primacy value within both law, individual companies, and wider societal practices. Luhmann’s systems theory is deployed here to identify the specific legal and extra-legal challenges that those wishing to steer corporate purpose towards SCP are likely to face. Existing socially orientated corporate governance initiatives, such as corporate social responsibility (CSR), are also critiqued with reference to systems theory. The potential for steering corporate purpose is also examined, along with indicative doctrinal solutions.