Empowering Shareholders to Pursue Sustainability

Underpinning much of the recent discussion regarding corporate governance has been the idea that capitalism should be reformed to take into account not just shareholders’ but also stakeholders’ interests. However, despite any such views, one principle that remains integral to the entire discourse is the concept of shareholder primacy. Rather than challenging this foundational norm in our society, we should embrace it – equipping shareholders with the tools to express their preferences in ways that reflect not only economic interests, but ethical, social, and environmental values they might have.

Shareholder primacy does not necessarily mean that shareholders must prioritize profit alone. In fact, many shareholders are increasingly willing to define corporate purpose through a non-economic lens as well. A more nuanced understanding of shareholder preferences opens the door to a more expansive and liberal vision of corporate purpose, where the ultimate owners of the company, as residual claimants, are free to determine whether they want to prioritize individual wealth creation, more widespread economic advancement, non-economic benefit, or any combination of these goals.

Taking Corporate Liberalism Seriously

Adopting a true liberalistic approach in corporate law means enabling shareholders to choose what their company stands for. This freedom is not theoretical – it’s being codified in recent legal reforms, such as those in France, with the Loi Pacte, and in Belgium, where the current version of the Code des sociétés et des associations explicitly allows a not-for-profit purpose; they allow companies to embed public benefit into their statutes without undermining shareholder control.

This approach challenges director-centered governance models that assume fiduciary duties must revolve around profit maximization. Instead, directors should be accountable to shareholders’ chosen priorities, whether economic or ethical. The law should protect this freedom, not constrain it. The question then is whether a specific corporate form should be adopted to facilitate such approach or whether any company (or its shareholders/members), irrespective of its chosen form of organization, should be enabled to pursue any kind of purpose.

Benefit Corporations: Between Promise and Proof

When it comes to specific forms of organization, I have mainly in mind the so-called “Benefit company” or more broadly “Benefit-related business organizations”, adopted by some national lawmakers. These organizations offer a legal framework for combining profit and purpose. In a recent paper, I explore how models like France’s société à mission and Italy’s società benefit reflect shareholder preferences and, in the process, integrate sustainability into business strategy. But the critical questions remain: what exactly is meant by “benefit”? How far should we take the concept of “public” as a corporate governance measure? Are such attempts genuine? Who monitors and enforces attempts to promote broader public purpose and what are their parameters?

Self-qualification as a “good company”, that happens when the company itself claims to be good and self-imposes the label of “Benefit” is manifestly insufficient. Without reliable and independent certification and public oversight, these labels risk becoming marketing tools rather than meaningful commitments. Public authorities must define thresholds of public benefit — clarifying if, how, and how much a company contributes to the common good. If the state fails to enforce these standards, it risks legitimizing symbolic gestures (and not necessarily sincere ones) over substantive impact.

Spain’s ongoing regulatory debate illustrates this tension. Should it adopt a legal designation, a certification, or both? A public labeling system — free from private monopolies — could offer transparency and accountability, provided it is backed by rigorous criteria and independent verification.

Corporate Finance as a Voluntary Pathway

Beyond legal forms, corporate finance offers voluntary tools to promote sustainability. Instruments such as green bonds, sustainability-linked loans, and ESG-related equity (e.g.: special class shares whose subscription is reserved for specific stakeholders) can reward companies for meeting environmental and social goals. These tools serve two distinct functions:

• They signal sustainability to investors and markets.
• They structure governance around measurable impact.

Their effectiveness, however, depends on standardized metrics and, again, on credible oversight. Without these, sustainability-linked finance risks becoming performative. Regulatory frameworks must ensure that these instruments deliver real-world results — not just reputational gains.

In another recent chapter for an edited collection, I highlight how different corporate finance tools — such as hybrid instruments, debt structures, and differentiated share classes — can foster cooperative governance between a company’s “classic” shareholders and other stakeholders. For example, shares designed for employee participation or sustainability-linked voting rights allow stakeholders to influence corporate direction, again without undermining shareholder primacy. These tools are not exclusive to sustainability, but they offer flexible pathways for aligning diverse interests within the corporate structure.

Sustainability as a Legal Priority

If sustainability is to be taken seriously, it must be treated as a legal priority — on par with the protection of minority shareholders, consumers, employees, or creditors. This means lawmakers must define minimum sustainability standards and enforce them with the same rigor applied to other stakeholder protections.

Public powers — national governments, supranational entities, and regulatory bodies — are responsible for setting these thresholds. They should also design optional incentive systems for companies willing to go beyond the minimum that encourage firms to “walk the extra mile” without mandating uniform approaches.

At the same time, market-driven strategies can complement legal frameworks. Consumer preferences – especially the trade-off between sustainability and price – play a crucial role. But for this model to work, companies must be reliable in their sustainability claims. Without trustworthy certification, consumer-driven sustainability becomes vulnerable to manipulation. For this reason, the entire edifice of sustainable capitalism – to some extent – relies on strong educational foundations.

A Shareholder-Led Sustainable Ecosystem

A sustainable corporate ecosystem does not require abandoning capitalism – it requires a strong fine-tuning. Shareholders must remain at the center, empowered to choose whether their companies pursue profit, purpose, or both. Legal forms and financial instruments should support this freedom, not constrain it.

Sustainability, then, becomes one legal priority, to be dealt with as we usually do with many other important societal goals that are either driven through the corporation, or in which the corporation plays an important role. The goals should be promoted through strong legal mechanisms, incentivized by policy, and validated by markets — but always needs to be subject to shareholder will. This is the essence of liberal corporate governance: enabling owners to define meaning, beyond monetary pursuits.

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Alessio Bartolacelli is an Associate Professor of Business Law and European Company Law at the University of Modena e Reggio Emilia.

This blog is based on a discussion which took place at The Corporation in Society: Corporate Law and Criminal Law Perspectives Workshop. Visit the event page to explore more conference-related blogs.

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