Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-30T17:17:03.523Z Has data issue: false hasContentIssue false
  • English
  • Français

The environmental business case and unenlightened shareholder value

Published online by Cambridge University Press:  02 January 2018

Carrie Bradshaw
Carrie Bradshaw*
Affiliation:
University College London
*
Carrie Bradshaw, PhD Candidate and Teaching Fellow, University College London, Bentham House, Endsleigh Gardens, London WC1H 0EG, UK. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The business case for corporate environmental responsibility is the claim that behaving responsibly makes financial sense. It is impossible to exaggerate the contemporary significance of this claim, not least in legitimising environmental concerns in the corporate sphere. However, the business case is not without significant empirical and normative limitations, as is illustrated by the corporate environmental problem of supermarket waste. This paper evaluates enlightened shareholder value under s 172 of the Companies Act 2006 in light of such business case limitations. It suggests that s 172, by procedurally mandating the business case for corporate environmental responsibility, is a retrograde step which envisions not enlightened, but rather environmentally unenlightened, shareholders.

Type
Research Article
Information
Legal Studies , Volume 33 , Issue 1 , March 2013 , pp. 141 - 161
Copyright
Copyright © Society of Legal Scholars 2013

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

Parts of this paper were presented at the Environmental Law Section of the SLS Annual Conference at Downing College, Cambridge, in September 2011 and at a UCL Faculty of Laws Staff Seminar in December 2011. I would like to thank the participants of both for interesting and useful discussion. I am also grateful for the insightful observations of two anonymous reviewers, as well as to Dr Douglas Guilfoyle for detailed comments on an earlier draft and Dr Marc Moore for extensive commentary and interesting discussions. I owe particular thanks to Professor Maria Lee, for her generosity with time in commenting on countless drafts. Any errors of course remain my own.

References

1. See, eg, McWilliams, A, Siegel, D and Wright, Pm ‘Corporate social responsibility: strategic implications’ (2006) 43 Journal of Management Studies 1 CrossRefGoogle Scholar. Indeed, the definitions are numerous: Carroll, Ab (‘Corporate social responsibility: evolution of a definitional construct’ (1999) 38 Business and Society 268 CrossRefGoogle Scholar) identified 25 different ways of defining CSR (see Melé, D ‘Corporate social responsibility theories’ in Crane, A, McWilliams, A, Matten, D, Moon, J and Siegel, Ds (eds)The Oxford Handbook of Corporate Social Responsibility (Oxford: Oxford University Press, 2008 Google Scholar)). For an argument that CSR is a useless term with little explanatory value, see JH van Oosterhout and PPMAR Heugens ‘Much ado about nothing: a conceptual critique of corporate social responsibility’ in Crane et al.

2. See, eg, Davis, K ‘the case for and against business assumption of social responsibilities’ (1973) 16 Academy of Management Journal 312 at 313CrossRefGoogle Scholar, describing CSR as beginning ‘where the law ends’, and Gunningham, N ‘Shaping corporate environmental performance: a review’ (2009) 19 Environmental Governance and Policy 215 CrossRefGoogle Scholar at 215. For a multifaceted appreciation of the relationship between CSR and law, see McBarnet, D ‘Corporate social responsibility beyond law, through law, for law: the new corporate accountability’ in McBarnet, D, Voiculescu, A and Campbell, T (eds)The New Corporate Accountability: Corporate Social Responsibility and the Law (Cambridge: Cambridge University Press, 2009).Google Scholar

3. M Friedman ‘The social responsibility of business is to increase its profits’ (1970) New York Times Magazine, 13 September.

4. Ibid.

5. See, eg, Blowfield, M and Murray, A Corporate Responsibility: A Critical Introduction (Oxford: Oxford University Press, 2008) p 211 Google Scholar, referring to shareholders as owners of the company (which is also the presumption underpinning Friedman's argument). Of course, shareholders do not own the corporation or its assets ( Ireland, P ‘Company law and the myth of shareholder ownership’ (1999) 62 MLR 32 CrossRefGoogle Scholar; Short v Treasury Commissioners[1948] 1 KB 116). On oversimplification generally, particularly in view of the wide discretion afforded to directors by courts in determining what is in the best interests of the company, see Parkinson, Je ‘the legal context of corporate social responsibility’ (1994) 3 Business Ethics: A European Review 16 CrossRefGoogle Scholar; McBarnet, above n 2, pp 22–23. Shareholder primacy is not without positive and normative controversy, and is considered in a little more detail in Section 3, below.

6. The origins are usually traced back to Dodd, E Merrick Jr ‘for whom are corporate managers trustees?’ (1932) 45 Harv L Rev 1145 CrossRefGoogle Scholar and Berle, Aa Jr ‘for who corporate managers are trustees: a note’ (1932) 45 Harv L Rev 1365 CrossRefGoogle Scholar.

7. Henderson, D Misguided Virtue: False Notions of Corporate Social Responsibility (London: Institute of Economic Affairs, 2001) p 128 Google Scholar.

8. Vogel, D The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, DC: Brookings Institution, 2006) pp 17–26 Google Scholar.

9. See, eg, McCann, M and Wheeler, S ‘Gender diversity in the Ftse 100: the business case claim explored’ (2011) 34 J L & Soc 542 CrossRefGoogle Scholar.

10. See, eg, Vogel, above n 8, ch 4.

11. Ibid, ch 6, especially pp 158–159 and references therein.

12. Margolis, Jd and Walsh, Jp People and Profits? The Search for a Link Between a Company's Social and Financial Performance (Abingdon: Psychology Press, 2009) p 5 Google Scholar.

13. See, eg, Allouche, J and Laroche, P ‘The relationship between corporate social responsibility and corporate financial performance: a survey’ in Allouche, J (ed)Corporate Social Responsibility: Performances and Stakeholders (Basingstoke: Palgrave Macmillan, 2006)Google Scholar; Cowe, R and Hopkins, M ‘Corporate social responsibility: is there a business case?’ in Burchell, J (ed)The Corporate Social Responsibility Reader (Abingdon: Routledge, 2008)Google Scholar; Kurucz, Ec, Colbert, Ba and Wheeler, D The Business Case for Corporate Social Responsibility in Crane, et al, above n 1Google Scholar; Preston, Le and O'Bannon, Dp ‘the corporate social–financial performance relationship: a typology and analysis’ (1997) 36 Business and Society 419 CrossRefGoogle Scholar; Zadek, S Doing Good and Doing Well: Making the Business Case for Corporate Citizenship (New York: Report for the Conference Board, 2000)Google Scholar.

14. M Orlitzky ‘Corporate social performance and financial performance: a research synthesis’ in Crane et al, above n 1 and Margolis and Walsh, above n 12. See also Banerjee, Sb ‘Corporate social responsibility: the good, the bad and the ugly’ (2008) 34 Critical Sociology 51 CrossRefGoogle Scholar at 60–61, relying primarily on these studies.

15. This is confirmed elsewhere. See, eg, Cowe and Hopkins, above n 13, p 106 and references therein.

16. See, eg, Allouche and Laroche, above n 13; Cowe and Hopkins, above n 13; Kurucz et al, above n 13; Vogel, above n 8.

17. Orlitzky, above n 14, p 56.

18. See, eg, the commentators referenced, above n 16.

19. Margolis and Walsh, above n 12, p 13; see also Allouche and Laroche, above n 13; Cowe and Hopkins, above n 13.

20. Margolis and Walsh, above n 12, p 8, noted that social performance was measured by drawing on 27 different data sources covering 11 different domains of corporate practice. See also Zadek, above n 13; Blowfield and Murray, above n 5, p 135.

21. Margolis and Walsh, above n 12.

22. Zadek, S, Sabapathy, J, Døssing, H and Swift, T Responsible Competitiveness: Corporate Responsibility Clusters in Action (London/Copenhagen: AcountAbility and Copenhagen Centre, 2003).Google Scholar

23. Margolis and Walsh, above n 12.

24. Orlitzky, above n 14.

25. Blowfield and Murray, above n 5, p 140. There is evidence to suggest that environmental laggards are less likely than businesses with a developed environmental mindset to attach significant value to these softer aspects of corporate performance. See Gunningham, N, Kagan, Ra and Thornton, D Shades of Green: Business, Regulation and Environment (Stanford, CA: Stanford University Press, 2003) ch 5Google Scholar.

26. Cowe and Hopkins, above n 13.

27. Vogel, above n 8, p 30; Blowfield and Murray, above n 5, p 145.

28. Compare Vogel, above n 8, p xi; Gunningham et al, above n 25, p 69; Allouche and Laroche, above n 13, p 15.

29. Margolis, Jd and Walsh, Jp ‘Misery loves companies: rethinking social initiatives by business’ (2003) 48 Admin Sci Q 268 CrossRefGoogle Scholar; Margolis and Walsh, above n 12.

30. Preston and O'Bannon, above n 13; Margolis and Walsh, above n 12, p 16.

31. Kurucz et al, above n 13; Reinhardt, F ‘Market failure and the environmental policies of firms: economic rationales for “beyond compliance” behaviour’ (1999) 13 Journal of Industrial Ecology 9 CrossRefGoogle Scholar; NC Smith ‘Consumers as drivers of corporate social responsibility’ in Crane et al, above n 1.

32. Vogel, above n 8, p 33; Reinhardt, F ‘Environmental product differentiation: implications for corporate strategy’ (1998) 40 California Management Review 43 CrossRefGoogle Scholar; Cowe and Hopkins, above n 13.

33. See, eg, Cowe and Hopkins, above n 13, p 105.

34. Smith, above n 31; see also Cowe and Hopkins, above n 13, p 109 suggesting that ‘the question is not does CSR pay, but when does CSR pay?’.

35. In view of space constraints, it was not possible to adopt a second case study. However, many of the conclusions drawn from the supermarket waste study will resonate elsewhere, as I outline briefly later in the paper. It should also be noted that waste also exemplifies ways in which a business case for CER may be partly a function of law. For a fuller account, see Bell, S and McGillivray, D Environmental Law (Oxford: Oxford University Press, 7th edn, 2008) ch 18Google Scholar. Notably, waste deposited in landfill is subject to a weight-based tax escalator, making diversion from landfill more financially attractive than might otherwise be the case.

36. Science and Technology Committee Waste Reduction (HL 2007-08, 163-I) [3.1].

37. Ibid, [6.1].

38. Hollins, Oakdene The Further Benefits of Business Resource Efficiency (London: Defra, 2011).Google Scholar

39. Defra Report of the Food Industry Sustainability Strategy Champions' Group on Waste (London: Defra, 2007) p 14 Google Scholar. Envirowise helped companies and suppliers identify over £12 million of food efficiency savings. See Stuart, T Waste: Uncovering the Global Food Scandal (London: Penguin, 2009) pp 54–55.Google Scholar

40. Stuart, above n 39, pp 11 and 208.

41. Science and Technology Committee, above n 36, [3.7]. Product light weighting involves using less material, or lighter material substitutes.

42. The Courtauld Commitments, Phase I (2005–2010) and Phase II (2010–2012).

43. See Jones, P, Comfort, D, Hillier, D and Eastwood, O ‘Corporate social responsibility: a case study of the Uk's leading food retailers’ (2005) 107 British Food Journal 423 CrossRefGoogle Scholar; Science and Technology Committee, above n 36, [7.20].

44. Science and Technology Committee, above n 36, [6.3]; Winne, S and Standley, S Business Resource Efficiency (London: AEA Technology Plc, 2009).Google Scholar

45. See, eg, Gunningham, above n 2, p 218, suggesting that the ‘single largest impediment’ to CER, even in the presence of a win–win, is probably a focus on short-term profit.

46. Science and Technology Committee, above n 36, [6.3].

47. Ibid, [4.24].

48. Ibid, [4.26].

49. On these other societal concerns which receive legitimacy in the corporate sphere by reference to the business case, see above n 9, n 10 and n 11.

50. McBarnet, D ‘Human rights, corporate responsibility and the new accountability’ in Campbell, T and Miller, S (eds)Human Rights and Moral Responsibilities of Corporate and Public Sector Organisations (Dordrecht: Kluwer, 2004).Google Scholar

51. Walley, N and Whitehead, B ‘It's not easy being green’ (1994) 72 Harv Bus Rev 46 Google Scholar.

52. Ibid.

53. Although some would argue that corporations or certain corporate activities are inherently bad for the environment. This type of argument is seen particularly in critiques of sustainable development on the basis of environmental limits. See Dobson, A Green Political Thought (London: Routledge, 2nd edn, 2000)Google Scholar; Holder, J and Lee, M Environmental Protection, Law and Policy (Text and Materials) (Cambridge: Cambridge University Press, 2nd edn, 2007) pp 250–256.CrossRefGoogle Scholar

54. Similar concerns have been levelled against sustainable development (see Dobson, above n 53, pp 62–68). For an argument that sustainable development has been co-opted or hijacked by corporations to promote the business status quo (in particular through CSR-type activities geared towards ‘sustainability’), see Banerjee, above n 14, pp 64–67; Hart, Sl ‘beyond greening: strategies for a sustainable world’ (1997) 75 Harv Bus Rev 6 Google Scholar.

55. See, eg, Banerjee, above n 14, pp 52–59, who refers to this as the ‘emancipatory rhetoric’ of CSR, where (as is argued here) such rhetoric is misleading or obfuscatory and, ultimately, dangerous. For a different understanding of ‘stakeholder’ rhetoric, see Fairfax, Lm ‘the rhetoric of corporate law: the impact of stakeholder rhetoric on corporate norms’ (20052006) 31 J Corp L 675 Google Scholar. Fairfax uses an Aristotelian conception of rhetoric which, rather than being deceptive or mere double talk, has an inherent ‘truth’ value. This includes seeing rhetoric as ‘expressive’, so that the use of stakeholder language by corporations indicates growing public dissatisfaction with shareholder primacy.

56. See, eg, MA Cherry and JF Sneirson ‘Chevron, greenwashing and the myth of “green oil companies”’ 2 November 2011, available at Strasser, Ka Myths and Realities of Business Environmentalism: Good Works, Good Business or Greenwash? (Cheltenham: Edward Elgar, 2011).CrossRefGoogle Scholar

57. Corkin, J ‘Misappropriating citizenship: the limits of corporate social responsibility’ in Boeger, N, Murray, R and Villiers, C (eds)Perspectives on Corporate Social Responsibility: Corporations, Globalisation and the Law (Cheltenham: Edward Elgar, 2008) p 43 Google Scholar.

58. D Ong ‘Locating the “environment” within corporate social responsibility’ in Boeger et al, above n 57.

59. Werther, Wb Jr and Chandler, D Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (San Diego, CA: Sage, 2006 Google Scholar); Ong, above n 58.

60. Wheeler, D and Sillanpää, M ‘including the stakeholders: the business case’ (1998) 31 Long Range Planning 31 CrossRefGoogle Scholar.

61. G Hanlon ‘Rethinking corporate social responsibility and the role of the firm: on the denial of politics’ in Crane et al, above n 1.

62. Ibid.

63. One might prefer to value environmental protection or seek enhanced corporate environmental responsibility for reasons other than profit. A similar argument has been made in the context of increased gender diversity on corporate boards, where the business case has become the ‘established narrative’; arguably, however, the case for diversity is more appropriately encapsulated in the non-profit values of social justice, equality and non-discrimination (see McCann and Wheeler, above n 9, pp 543–544 and 551). My concern that any inherent value in environmental protection is lost in business case CSR resonates with Tom Campbell's distinction between ‘instrumental’ and ‘intrinsic’ CSR. Interestingly, Campbell considers the normative grounding for instrumental (business case) CSR fairly uncontroversial, in stark contrast to what has been argued here. See T Campbell ‘The normative grounding of corporate social responsibility: a human rights approach’ in McBarnet et al, above n 2. Contrast this with Parkinson, Je Corporate Power and Responsibility: Issues in the Theory of Company Law (Oxford: Oxford University Press, 2008) ch 9Google Scholar, distinguishing between ‘profit-sacrificing’ and ‘non-profit sacrificing’ (instrumental/business case) CSR, and seeking primarily to justify the former.

64. See Holder and Lee, above n 53, pp 34–40 and compare Pearce, D and Barbier, Eb Blueprint for a Sustainable Economy (London: Earthscan, 2000) pp 2–8 Google Scholar with Ackerman, F and Heinzerling, L Priceless: On Knowing the Price of Everything and the Value of Nothing (New York: New Press, 2004) p 8 Google Scholar.

65. Portney, Pr ‘Corporate social responsibility: an economic and public policy perspective’ in Hay, Bl, Stavins, Rn and Vietor, Rhk (eds)Environmental Protection and the Social Responsibility of Firms: Perspectives from Law, Economics and Business (Washington, DC: Resources for the Future, 2005).Google Scholar

66. Holder and Lee, above n 53, p 450. The reasons for demanding public participation and deliberation in environmental decision making are well-rehearsed within environmental law scholarship, in particular that more inclusive participation can yield substantively better outcomes. See Steele, J ‘Participation and deliberation in environmental law: exploring a problem-solving approach’ (2001) 21 OJLS 415 CrossRefGoogle Scholar.

67. Dobson, A Citizenship and the Environment (Oxford: Oxford University Press, 2003).CrossRefGoogle Scholar

68. Corkin, above n 57; Hanlon, above n 61.

69. This is a general concern with CSR. See, eg, Gunningham, N and Sinclair, D Leaders and Laggards: Next-generation Environmental Regulation (Sheffield: Greenleaf, 2002) chs 6 and 7Google Scholar, suggesting that CSR type activities (such as ‘self-regulation’) are sometimes adopted in the hope of avoiding (more exacting) governmental regulation, and Banerjee, above n 14, pp 62–63, arguing that CSR discourses ‘could have the effect of reducing governmental scrutiny of corporate practices because they promote a particular form of self-governance’.

70. Reinhardt, above n 32; Porter, M and van der Linde, C ‘Green and competitive: ending the stalemate’ (1995) 73 Harv Bus Rev 120 Google Scholar.

71. Science and Technology Committee, above n 36, [5.15]; Smith, above n 31.

72. Jones, P, Comfort, D and Hillier, D ‘Marketing and corporate social responsibility within food stores’ (2007) 109 British Food Journal 582 CrossRefGoogle Scholar at 590.

73. Lee, M EU Environmental Law: Challenges, Change and Decision-making (Oxford: Hart, 2005) p 211 (and references therein).Google Scholar

74. Foresight The Future of Food and Farming: Final Project Report (London: Government Office for Science, 2011) Annex C7Google Scholar; Jones et al, above n 72, at 589.

75. The Courtauld Commitments.

76. Jones et al, above n 72.

77. Stuart, above n 39, p 69. Since 2008, there does seem to have been a decline in BOGOF promotions in favour of price reduction deals, although 3-for-2 offers persist.

78. Foresight, above n 74; Defra, above n 39; Stuart, above n 39, pp 24–28, 46–48 and 109.

79. Ibid.

80. See, eg, Jackson, T Motivating Sustainable Consumption: A Review of Evidence on Consumer Behaviour and Behavioural Change (London: Sustainable Development Research Network, 2005).Google Scholar

81. Laminates are difficult to recycle and plastics such as polyethylene terephthalate (PET), used as a substitute for infinitely recyclable glass, cannot be recycled in this country. See Science and Technology Committee, above n 36.

82. The UK Soil Association estimated that supermarkets reject 25–40% of most British-grown crops, although this is partly owing to EU uniformity rules on fruit and vegetables. Nonetheless, supermarkets are known to impose stricter requirements than these rules. See Stuart, above n 39, p 108.

83. Foresight, above n 74.

84. Ibid; Stuart, above n 39, pp 108–116.

85. In part because of the perceived environmental business case, energy efficiency has featured heavily in climate change mitigation activities, and Government publications frequently invoke similar imperatives when seeking to sell the benefits of moving towards a ‘green’ or low-carbon economy. See Government, Hm Enabling the Transition to a Green Economy: Government and Business Working Together (London: The Stationery Office, 2011) pp 2 and 4–5.Google Scholar The building sector has been singled out as a particularly fruitful area for just such initiatives, with success likely to be hampered by energy efficiency ‘behavioural barriers’ similar to those outlined above. See Dawes, R ‘Building to improve energy efficiency in England and Wales’ (2010) 12 Env L Rev 266.CrossRefGoogle Scholar UK businesses across a range of economic sectors (subject to certain thresholds and exemptions) now participate in the Carbon Reduction Commitment Energy Efficiency Scheme – a mandatory emissions trading scheme made slightly more palatable by estimated savings of around £1 billion from reduced energy bills. See Hopkins, J ‘the Carbon Reduction Energy Efficiency Scheme: overview, rationale and future challenges’ (2010) 12 Env L Rev 211 CrossRefGoogle Scholar at 213.

86. See Jackson, above n 80.

87. See Lee, above n 73.

88. The literature is too voluminous to cite in full, but see, eg, Deakin, S ‘the coming transformation of shareholder value’ (2005) 13 CG 11 Google Scholar; Stallworthy, M Sustainability, the environment and the role of Uk corporations (2006) ICCLR 155 Google Scholar; Keay, A Enlightened shareholder value, the reform of the duties of company directors and the corporate objective 2006 LMCLQ 335 Google Scholar; Alcock, A An accidental change to directors' duties?’ (2009)Co Law 362 Google Scholar. For the general context of ESV, see the Company Law Review Steering Group (CLRSG) Modern Company Law for a Competitive Economy: The Strategic Framework (London: Department of Trade and Industry, 1999), particularly ch 5, pp 33–46 and 48–53Google Scholar.

89. Sometimes called ‘shareholder value theory’ or ‘shareholder wealth maximisation’. Both normatively and positively, shareholder primacy is controversial, although it does nonetheless represent the orthodox view. See, eg, CLRSG, above n 88, pp 34–37. The academic literature is extensive. See, eg, Bainbridge, Sm ‘in defense of the shareholder maximisation norm: a reply to Professor Green’ (1993) 50 Wash and Lee LRev 1423 Google Scholar; Stout, La ‘Bad and not-so-bad arguments for shareholder primacy’ (2002) 75 S Cal L Rev 1189 Google Scholar; Ireland, P ‘Property and contract in contemporary corporate theory’ (2003) 23 LS 453 Google Scholar; A Keay ‘Shareholder Primacy in Corporate Law: can it survive? should it survive?’ 1 November 2009, available at.

90. Bainbridge, Sm ‘Director primacy: the means and ends of corporate governance’ (2003) 97 NWULR 547 Google Scholar.

91. For director appointment, see Companies Act 2006 (CA 2006), Model Articles (Private Companies), Reg 17; Model Articles (Public Companies), Regs 19 and 20; Worcester Corsetry Ltd v Witting[1936] Ch 640. For director dismissal, see CA 2006, s 168; CA 2006, Model Articles, Reg 4. For directors' duties and the enforcement derivatively thereof by shareholders, see CA 2006, Pts X and XI. The strength of shareholder voice vis-a-vis the board of directors is of course open to debate, but the point made here is that shareholders hold voice to the exclusion of other stakeholders.

92. It is well established that directors, not shareholders, manage the business. See CA 2006, Model Articles, Regs 3–4; Automatic Self-Cleansing Filter Syndicate Co Ltd v Cuninghame[1906] 2 Ch 34; Sealy, L and Worthington, S Cases and Materials in Company Law (Oxford: Oxford University Press, 8th edn, 2008) p 167 and ch 4Google Scholar.

93. On the idea of the company as a club, see MT Moore ‘Beyond private ordering: towards an “intelligent design” theory of corporate law evolution’ UCL Research Seminar Working Paper, October 2010; Moore, Mt Corporate Governance in the Shadow of the State (Oxford: Hart, 2012) ch 6Google Scholar.

94. For a broad overview, see Williams, Ca and Conley, Jm ‘Triumph or tragedy? the curious path of corporate disclosure reform in the Uk’ (2007) 31 William and Mary Environmental Law and Policy Review 317 Google Scholar.

95. CA 2006, ss 172(1)(a)–(f).

96. For example (and with varying levels of optimism), see Yap, Jl ‘Considering the enlightened shareholder value principle’ (2010)Co Law 35 Google Scholar; Roach, L ‘the legal model of the company and the company law review’ (2005) 26 Co Law 98 Google Scholar; Ho, Vh ‘“Enlightened shareholder value”: corporate governance beyond the shareholder–stakeholder divide’ (2010) 36 J Corp L 59 Google Scholar; Kiarie, S ‘at crossroads: shareholder value, stakeholder value and enlightened shareholder value: which road should the United Kingdom take?’ (2006) 17 ICCLR 329 Google Scholar; Williams, Ca and Conley, Jm ‘an emerging third way? the erosion of the Anglo-American shareholder value construct’ (2005) 38 Cornell Int'l LJ 493 Google Scholar.

97. Keay, above n 88; Keay, A ‘Tackling the issue of the corporate objective: an analysis of the United Kingdom's enlightened shareholder value approach’ (2007) 29 Syd LR 577 Google Scholar.

98. CA 2006, s 170.

99. The meaning of ‘success of the company’ in s 172 is unclear, although ministerial statements suggest this means long-term shareholder value. See Kershaw, D Company Law in Context: Text and Materials (Oxford: Oxford University Press, 2009) p 349 Google Scholar.

100. CLRSG, above n 88, p 37 [5.1.12].

101. Ibid, p 36 [5.1.8]–[5.1.9] and p 40 [5.1.19].

102. Ibid, p 40 [5.1.19].

103. Ibid, p 36 [5.1.10] and pp 39–41 [5.1.17], [5.1.20]–[5.1.22].

104. Keay, above n 88; Deakin, above n 88; Attenborough, D ‘How directors should act when owing duties to the company's shareholders: why we need to stop applying Greenhalgh’ (2009) 20 ICCLR 339 Google Scholar.

105. Keay, A ‘Moving towards stakeholderism? Enlightened shareholder value, constituency statutes and more: much ado about little?’ (2011) 22 EBLR 1 Google Scholar at 41.

106. Keay, above n 105, at 29, points also to the reform background – in particular the rejection of what was termed a ‘pluralist’ approach, which would see stakeholder concerns as ‘ends in themselves’. The pluralist approach maps what is more generally understood as stakeholder theory (often attributed to Freeman, Re Strategic Management: A Stakeholder Approach (Boston, MA: Pitman/Ballinger, 1984)Google Scholar). However, there is disagreement as to whether this requires stakeholders to be treated as ends in themselves, or merely as means to a (corporate) end (albeit perhaps in a firm with a corporate objective pertaining to the creation of value for all corporate constituents, not just shareholders). See, eg, Walsh, Jp ‘Book review essay: taking stock of stakeholder management’ (2005) 30 Academy of Management Review 426 CrossRefGoogle Scholar; Freeman, ibid, p 97. This resonates with the distinction between inherent and instrumental CSR. See Campbell, above n 63.

107. Keay, above n 105, at 40–41 and Keay, above n 97, at 592.

108. A potential ‘environmental’ breach of s 172 is the share price, revenue and reputational costs arising from a failure to implement adequate environmental protection measures (Keay, above n 105, at 29; see also Kershaw, above n 99 on the meaning of ‘success of the company’ and the hypothetical application of s 172 to the BP oil disaster in the Gulf of Mexico by Alexander, R ‘Bp: protection of the environment is now to be taken seriously in company law’ (2010)Co Law 271 Google Scholar). Stallworthy, above n 88, at 159, suggests that the duty-emphasis on shareholder interests is representative of a reluctance in private law generally to accommodate values beyond a raw and narrow economic individualism.

109. CLRSG, above n 88, ch 5 generally.

110. The cause of action vests in the corporation, also enforceable derivatively by shareholders. See above n 91.

111. In essence, this is a problem of using ‘private’ law instrumentally for environmental purposes. This will be familiar to environmental lawyers, particularly concerning private nuisance. See, eg, Steele, J ‘Private law and the environment: nuisance in context’ (1995) 17 LS 236 Google Scholar.

112. ESV clearly prioritises investors as the voice for corporate environmental responsibility, though of course business cases arise from other economic actors, including customers and environmental NGOs. However, with business case CER and instrumentalism in ESV, even the advocacy of NGOs (who might be expected to express the value of the environment in non-economic terms) boils down to impacts on the financial bottom line. See Ho, above n 96, at 101–106, arguing that many stakeholders in ESV are ‘indirect and imperfect substitutes for direct participation’.

113. See also Villiers, C ‘Directors' duties and the company's internal structures under the Uk Companies Act 2006: obstacles for sustainable development’ (2011) 8 ICCLJ 47 Google Scholar.

114. Stallworthy, above n 88, at 165.

115. Environment Assessment is the most obvious example of this.

116. C Parker ‘Meta-regulation: legal accountability for corporate social responsibility’ in McBarnet et al, above n 2, argues that process-oriented CSR interventions must be accompanied by a norm or value (not necessarily a standard) to yield positive outcomes.

117. The institution of ESV is not necessarily a denial that environmental and shareholder interests may never diverge, but rather that any manifestations of this mismatch (negative environmental externalities) ought to be addressed not through company law, but by environmental regulation. See, eg, Lord Goldsmith during Parliamentary debates, Hansard HL Deb, vol 678, col GC271, 6 February 2006; Copp, Sf ‘S. 172 of the Companies Act 2006 fails people and planet?’ (2010)Co Law 406 Google Scholar. Nonetheless, by embedding the business case as a procedural norm, s 172 adopts this problematic starting point of ready compatibility.

118. See, eg, Ho, above n 96, at 80–83; Kiarie, above n 96; Deakin, S ‘Squaring the circle? Shareholder value and corporate social responsibility in the Uk’ (2002) 70 Geo Wash LRev 976 Google Scholar.

119. See, eg, Ost, F ‘A game without rules? The ecological self-organisation of firms’ in Teubner, G, Farmer, L and Murphy, D (eds)Environmental Law and Ecological Responsibility: The Concept and Practice of Ecological Self-organization (Chichester: John Wiley & Sons, 1994).Google Scholar

120. CA 2006, s 417(2). See also Villiers, C Corporate Reporting and Company Law (Cambridge: Cambridge University Press, 2006)CrossRefGoogle Scholar; Chiu, Ih-Y ‘the paradigms of mandatory non-financial disclosure: a conceptual analysis: parts 1 and 2’ (2006)Co Law 259 Google Scholar at 291, on the distinction between shareholder (or ‘non-CSR’) and stakeholder-centric reporting.

121. Debate as to whether s 172 intended to codify or alter the previous common law position (see, eg, Alcock, above n 88, at 368) is irrelevant to the point I make here, which is that ESV is now mandatory and backed by an unambiguous legislative statement.

122. Previously Companies Act 1980, s 46.

123. There was debate as to the precise effect of s 309. Some suggested that since s 309 gave ‘no indication’ that the interests of employees and shareholders were to be weighted differently, directors were thus required to balance the interests of employees with those of shareholders. Others, in rejecting any notion of balancing, pointed out that s 309 did not affect the ‘interests of the company’, which continued to be defined by reference to shareholders. See Parkinson, above n 63, pp 82–85, quoting Boyle, Aj (ed)Gore-Browne on Companies (Bristol: Jordans, 44th edn, 1986).Google Scholar

124. This would be a defence for directors in that they would be permitted to have regard to the environment other than instrumentally for shareholder wealth generation. Given the limited enforcement routes (discussed further, below n 126), this would be a ‘shield’ for director decision making rather than a ‘sword’ for potential litigators.

125. As noted by Parkinson, above n 63, p 82, there is ‘inevitably’ conflict between the interests of employees and shareholders, so that the duty to have regard to employees is not necessarily harmonious with, or instrumental to, shareholder wealth generation. Win–win rhetoric, therefore, did not underpin s 309.

126. Section 309 was described as a lame duck provision. See Keay, A ‘Section 172(1) of the Companies Act 2006: an interpretation and assessment’ (2007)Co Law 106 Google Scholar at 109; Pettet, B ‘Duties in respect of employees under the Companies Act 1980’ (1981) 34 CLP 199 Google Scholar at 200–204. As with s 172, the s 309 duty was owed to the company, so that in turn any wrong was against, and the cause of action vested in, the company (on s 172 enforcement, see above n 91). Employees therefore had no remedy under the provision. Sealy, Ls (‘Directors' “wider” responsibilities: problems conceptual, practical and procedural’ (1987) 13 Mon LR 164 Google Scholar at 177) described s 309 as ‘either one of the most incompetent or one of the most cynical pieces of drafting on record’, since central to its perceived failings was the unusual statutory language of ‘to have regard’ comprising a duty which was owed not to the intended beneficiaries of the obligation but rather to the company.

127. CLRSG, above n 88, [5.1.12]. See also CA 2006, s 172(1)(a), requiring directors to have regard to the likely consequences of any decision in the long term.

128. See, eg, Richardson, Bj and Cragg, W ‘Being virtuous and prosperous: Sri's conflicting goals’ (2010) 92 Journal of Business Ethics 21 CrossRefGoogle Scholar.

129. See above n 127.

130. And much more likely a perspective of between three and six months. See Aiyegbayo, O and Villiers, C ‘the enhanced business review: has it made corporate governance more effective?’ (2011)JBL 699 Google Scholar at 722. One of the respondents to the study outlined in Gunningham et al, above n 25, p 63, referred to this as the ‘tyranny of quarterly returns’, such that long-term benefits can be ‘substantially discounted or ignored’.

131. See, eg, Greenwood, Djh ‘Fictional shareholders: “for whom is the corporation managed” revisited’ (1996) 69 S Cal LRev 1021 Google Scholar; Stout, L The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public (San Francisco, CA: Berrett-Koehler, 2012).Google Scholar

132. Elhauge, E ‘Sacrificing corporate profits in the public interest’ (2005) 80(3)NYUL Rev 733 Google Scholar.

133. And indeed, there is some empirical evidence to suggest that the attitudes of investors (generally, as well as after the institution of ESV) do not correspond with more exacting notions of ‘responsible investment’. See Aiyegbayo and Villiers, above n 130.

134. See also Villiers, above n 113, arguing that enlightened shareholder value, despite first appearances, is not really compatible with (stronger or more transformative) versions of sustainable development, although this argument is more focused on gender diversity at board level than on environmental concerns.