New trends in legal frameworks for purpose‐driven companies—The European way(s)

• Published date: 01 December 2023
• Author: Livia Ventura
• Date: 01 December 2023
• DOI: http://doi.org/10.1111/emre.12627

RESEARCH DIALOGUE

New trends in legal frameworks for purpose-driven companies—The

European way(s)

Livia Ventura

1,2

1

Cambridge University Institute for

Sustainability Leadership, Cambridge, UK

2

Luiss Guido Carli, Rome, Italy

Correspondence

Livia Ventura, Cambridge University Institute

for Sustainability Leadership, the Entopia

Building, 1 Regent St, Cambridge, UK; Luiss

Guido Carli, Rome, Italy.

Email: livia.ventura@cisl.cam.ac.uk

[Correctionadded on 10 January 2024, after first

online publication:Article title has been

corrected from‘Corporate purposes and the law.

New trends in legalframeworks for purpose-

driven companies—TheEuropean way(s)’to

‘New trends in legal frameworksfor purpose-

driven companies—TheEuropean way(s)’]

Abstract

The debate on corporate governance of business companies and the discussions

on the concept of corporate purpose intensified. Looking at the role of law in

ensuring that businesses profit from creating benefits and not from creating detri-

ments, it is worth distinguishing between interventions designed to incentivise the

former (e.g., mandatory rules on sustainability disclosure or new dual-purpose

companies) and disincentivise the latter (tort or recent supply chain due diligence

laws). Nevertheless, the existence of a grey area for activities that do not material-

ise in tort, or the violation of other mandatory rules cannot be denied and is prob-

ably where the reconceptualisation of fiduciary duties can mediate. New legal

trends in these areas are mapped with a special focus on the European context

and some comparative law considerations with respect to the United Kingdom

and the United States. Finally, a suggestion for the future of European harmoni-

sation on dual-purpose companies will be offered.

KEYWORDS

dual-purpose companies, fiduciary duties, supply chain due diligence, sustainability reporting

BEYOND SHAREHOLDER PRIMACY IN

THE LAW?

The shareholder primacy model principally developed in

the US corporate context (considered as a social norm:

Millon, 2013; Smith, 1988; Sneirson, 2009; Stout, 2008,

2012; or as a legal mandate: Bainbridge, 1993;

Strine, 2012,2014a,2014b,2015) has become relatively

recently the predominant accepted model in corporate

practice (Bainbridge, 1996; Davis, 1988; Lund &

Pollman, 2021) and company law, even though the pur-

suit of some form of public interest was one of the core

elements of business corporations since their birth as

chartered companies (Williston, 1888).

The UK and other common law systems were perme-

ated by the Anglo-Saxon liberal market approach. Conti-

nental Europe’s systems, typically characterised by a

more significant interaction of firms with other stake-

holders, have also been encouraged to move towards the

Anglo-American model (Collison et al., 2011) due to

the financialisation (Aglietta & Reberioux, 2005;

Sneirson, 2019), to the extent that a great convergence

was observed at the end of the last century among major

Western legal tradition countries (Hansmann &

Kraakman, 2001).

Currently, the debate on corporate governance of

business companies and the discussions on the manage-

rial and legal concept of ‘corporate purpose’(Bebchuk &

Tallarita, 2020; Edmans, 2021; Fisch & Davidoff

Solomon, 2020; Fleischer, 2021; Lund & Pollman, 2021;

Mayer, 2013,2017,2018,2020; Rock, 2020; Strine, 2021;

The British Academy, 2019) have indeed intensified

among business and legal scholars, especially in Western

legal tradition countries (Puchniak, 2022).

Such debate has fuelled and has in turn been fuelled,

on one side, by recent legislative and regulatory frame-

work developments aimed at tackling environmental and

social challenges and giving legal shape to the concept of

corporate purpose and, on the other, by the pressure to

reinterpret the content of directors’fiduciary duties in

terms of sustainability arising from the surge of

sustainability-related lawsuits and ESG-led shareholder

DOI: 10.1111/emre.12627

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided

the original work is properly cited.

© 2023 The Author. European Management Review published by John Wiley & Sons Ltd on behalf of European Academy of Management (EURAM).

European Management Review. 2023;20:725–732. wileyonlinelibrary.com/journal/emre 725