Please take a moment to complete this sentence with the first thing that comes to mind:
“Corporations exist to ____________.”
Nearly everyone will immediately respond “make a profit” or a similar answer. That’s how pervasive the reigning ideology and paradigm regarding corporations has become. It has become an almost tautological response – like “the purpose of a can opener is to open cans” – that the raison d’etre for corporations, their very purpose, is to make a profit. The dominant view of the firm – and the oft-asserted legal theory – is that corporations and their boards have duties to maximize short-term profits for the benefit of shareholders, without regard to other stakeholders such as customers, employees, unions, or affected communities. That theory isn’t true, however, either in actual behavior or in law. The true purpose of a corporation is to create value – value that is shared among customers, shareholders, other stakeholders, and society at large.