The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research

A long-standing ideology in business education has been that a corporation is run for the sole interest of its shareholders. I present an alternative view where increasing concentration of economic activity and power in the world’s largest corporations, the Global 1000, has opened the way for managers to consider the interests of a broader set of stakeholders rather than only shareholders. Having documented that this alternative view better fits actual corporate conduct, I discuss opportunities for future research. Specifically, I call for research on the materiality of environmental and social issues for the future financial performance of corporations, the design of incentive and control systems to guide strategy execution, corporate reporting, and the role of investors in this new paradigm.  George Serafeim is at Harvard Business School. The Division of Faculty Research and Development of the Harvard Business School provided financial support for this project. I am indebted to Robert Eccles without whom I would not have studied many of the phenomena described in this article. I am grateful to Ioannis Ioannou, Joshua Margolis, Tim Youmans, and Rodrigo Verdi and participants at the Information, Organization, and Markets conference at Harvard Business School for many helpful comments. Andrew Knauer provided excellent research assistance. None of these individuals necessarily agree with the conclusions of this paper. All errors are my own. Contact email: [email protected].