In "Prosperity," Professor Colin Mayer proposes a corporate law change, advocating for social goals in company constitutions. The chapter, however, argues this requires more than a legal tweak. Analyzing two cases, it suggests shareholders resisting profit restrictions under Friedman’s principle pose challenges. Insights from French corporate statements, US reactions to Public Benefit Corporation proposals, and UK companies’ responses reveal hurdles. Proposed solutions include reducing shareholder powers or court-specified purposes. In the second case, exploring investors prioritizing non-financial goals, the chapter considers Environmental, Social, and Governance (ESG) investing. Despite alignment potential, current ESG falls short. Uncertainty surrounds its future. If successful, the chapter contends existing corporate law can accommodate goals without a mandatory purpose. In summary, it suggests the mandatory purpose requirement may be ineffective in the first case or largely unnecessary in the second, highlighting the complexities in reshaping corporate conduct.

This chapter starts by explaining that, when a company becomes factually insolvent but it is not yet subject to a formal insolvency proceeding, the shareholders – or the directors acting on their behalf – may engage, even in good faith, in various forms of behavior that can divert or destroy value at the expense of the creditors. Moreover, the individual behavior of certain creditors can also destroy or divert value in a situation of financial distress. For this reason, most jurisdictions around the world respond with a variety of strategies, including the imposition of special directors’ duties in the zone of insolvency. The chapter identifies six regulatory models for the design of directors’ duties in the zone of insolvency. After exploring the advantages and weaknesses of each regulatory model, the chapter analyzes a variety of country-specific and firm-specific factors that may affect the desirability of a particular regulatory approach. It concludes by suggesting various policy recommendations for the design of directors’ duties in the zone of insolvency taking into account the particular features of emerging economies.

This chapter, along with Chapters 5 to 6, examines the legal duties that constrain accumulation once a charity has been created. Controller duties (e.g. directors’ duties and trustee duties) are the focus of this chapter. Clearly, duties of loyalty, good faith and of care and diligence can potentially play a restraining role in relation to agency costs, the risk of which can be heightened by accumulation. Further, controller duties also raise the possibility of regulating the retention and distribution of charity assets by controllers, thus affecting the intergenerational distribution of benefits. The chapter provides an overview of the controller duties arising from each of the main legal forms adopted by charities and analyzes the impact of those duties on accumulation. Particular attention is paid to duties arising on the exercise of discretionary powers, such as the duties to act upon genuine consideration and to act impartially. Examples are provided primarily from Australia, the United Kingdom and the United States.

Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law in relation to the duties of care and skill. This chapter is the first of two chapters addressing the duties of loyalty and good faith. These duties fall into two categories: those concerned with the way in which directors exercise the powers and discretions vested in them, and those concerned with the standard of conduct expected from directors.

Multinational enterprises operate in an increasingly international environment and their operations are subject to a variety of rules from both hard and soft law. They take advantage of weak accountability systems and poor law enforcement in developing countries, necessitating a better understanding of the most appropriate hard-law approach to regulate them and address business sustainability challenges. Despite the division between the hard and soft legislative approaches used to address extraterritorial challenges, current efforts have been criticised primarily regarding their impact and enforceability. This chapter explores possible approaches for better extraterritorial regulation of corporate sustainability, including more detailed and extended directorial duties, together with enforcement measures driven by the state. Such efforts may direct board members’ attitudes towards more active involvement with extraterritorial corporate sustainability challenges.

Australia’s relatively conservative corporate law regime does not reflect developments in the soft law and culture in support of corporate sustainability. There is only weak support for sustainability under the Australian legal framework, in particular in the context of directors’ duties. But this orthodox legal regime is being overtaken by a strengthening sustainability culture in Australia, as evidenced by empirical research on director attitudes; relevant listing rules and corporate governance principles; increasing institutional investor interest in sustainability; strengthened non-financial reporting rules, including in the context of labour standards and global supply chains; and other recent developments. The chapter concludes that the past decade has seen a cultural shift led by the ASX Corporate Governance Council, major institutional investor groups, and individual proponents from the legal and business communities towards a strongly increased emphasis on sustainability.