Are companies about shareholder or stakeholder value?

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Sustainability is becoming mainstream and influencing how companies see themselves, and even leading CEOs have begun to encourage greater reflection on the role and obligations of the organisations they run [1].

  • Sustainability influences how companies see their roles and responsibilities
  • What is the purpose of companies and does it need to be redefined?
  • The critical role of the financial sector in helping to deliver more sustainable outcomes

The increasing attention being focused on the need to redefine the purpose of companies was evident in the keynote addresses of the recent second annual conference of the Global Research Alliance for Sustainable Finance and Investment (GRASFI) [2].

Obligation to create shareholder value…

Professor John Kay opened the conference by arguing that the assumptions that corporate executives are employees of the owners of the business, and that the shareholders are the owners of the business, are both false.

He demonstrated that, under different ownership tests, shareholders cannot be said to own the corporation. If anybody does, it is the managers, but really nobody owns corporations. As a result, managers do not have the obligations to shareholders described by Milton Friedman [3], they have obligations to fulfil the purpose of the corporations that employ them, whatever these are. These include, but need not be limited to, creating shareholder value.

…or should companies serve all stakeholders?

Colin Mayer expanded on the role of companies in the closing address. He spoke about the need to reconfigure the role of corporations. In his view, the purpose of companies is to find profitable solutions to problems. In doing this successfully, they are likely to make profits and reward shareholders, but maximising profits, per se, is not their purpose. Companies should serve all stakeholders – society, employees, suppliers, the environment, future generations, etc.

The conference built on the success of the first meeting. The unique mix of backgrounds – academics, students and industry practitioners – and the rich diversity of approaches to sustainability issues ensured a lively exchange of views and incisive questions. The papers explored themes from macro-prudential frameworks to engagement, disclosure and innovative data.

Financial sector can do better helping to deliver more sustainable outcomes

There was a strong focus on climate change, and the unexpected or unintended consequences of climate change regulation. Another theme was the critical role of the financial sector in helping to deliver more sustainable outcomes, and a clear “can do better” verdict on the industry in this regard. The event underlined the need for coordination in sustainability research, and the many mutually advantageous opportunities for collaboration between the academic sector and industry.

The award for the best paper overall was presented by BNPP AM CEO Frederic Janbon [4] and went to Norah Prankatz (Maastricht University) and Alexander Wagner (University of Zurich) for “Climate Change and Adaptation in Global Supply-Chain Networks”. This innovative piece examines how companies adapt to the climate-change related disruption risks for their supply chain networks.


[1] “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” From Business Roundtable https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans; August 2019


[2] GRASFI, founded in 2017 to promote multi-disciplinary academic research on sustainable finance and investment, consists of around 20 universities, each with expertise in this emerging field.

GRASFI aims to

  • organise a major annual academic conference
  • develop academic collaboration between researchers working on sustainable finance and investment
  • nurture the growth and development of graduate students and junior academics working on sustainable finance and investment.

In 2018, BNP Paribas Asset Management became GRASFI’s exclusive asset management sponsor for three years for its annual academic conference.


[3] Milton Friedman, The social responsibility of business is to increase its profits’, in Beauchamp and Bowie (eds.) (1988); https://www.johnkay.com/1998/02/03/the-role-of-business-in-society/


[4] BNP Paribas Asset Management aims to achieve long-term sustainable investment returns for clients.  This means that we integrate sustainable investment practices into the heart of what we do. We want our investments to be a driving force for change: for clients, their beneficiaries and the world we live in. We have identified three critical pre-conditions for a more sustainable and inclusive economic system:

  • An energy transition to a low carbon economy
  • Environmental sustainability
  • Equality and inclusive growth.

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Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.

Guy Williams

Head of Macro Research, Investment Process and Risk

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