Modern capitalism and globalisation rely on the free movement of capital across borders. Article 63 of the Treaty on the Functioning of the European Union is unusual in applying not just to movement between Member States, but also to capital movements between Member States and third countries. It makes all measures which deter foreign investment unlawful, unless they can be shown to serve a public interest aim and be proportionate. Those principles have been applied to rules on land ownership, taxation and also to golden shares: a mechanism by which governments retain an influence over privatised strategic industries. That influence, because it serves the public interest and not profit, is considered by the Court of Justice likely to deter investors. The implicit view that any constraints on companies which hinder their profit-making are prima facie contrary to Article 63 is controversial. On the other hand, the Treaty also recognises the need for many restrictions on free movement of capital, to protect the cohesion of tax systems, or as part of sanctions or measures against money laundering.

As scholars and activists seek to define and promote greater corporate political responsibility (CPR), they will benefit from understanding practitioner perspectives and how executives are responding to rising scrutiny of their political influences, reputational risk and pressure from employees, customers and investors to get involved in civic, political, and societal issues. This chapter draws on firsthand conversations with practitioners, including executives in government affairs; sustainability; senior leadership; and diversity, equity and inclusion, during the launch of a university-based CPR initiative. I summarize practitioner motivations, interests, barriers and challenges related to engaging in conversations about CPR, as well as committing or acting to improve CPR. Following the summary, I present implications for further research and several possible paths forward, including leveraging practitioners’ value on accountability, sustaining external calls for transparency, strengthening awareness of systems, and reframing CPR as part of a larger dialogue around society’s “social contract.”

There have been countless studies of corporate social responsibility and ESG across many disciplines. Law, economics, business administration and management, sociology, ethics, and theology, among others, have all made contributions. One might hope that a compelling business case for either corporate social responsibility/ESG or shareholder value maximization would have emerged from all that work. In fact, however, the results have been all over the map.

Shareholder value maximization is the law. It ought to be the law. This is, in part, because the chief alternative available in liberal democratic societies – stakeholder capitalism – is fundamentally flawed. If executives such as those who signed the Business Roundtable’s 2019 statement on corporate purpose really tried to run their companies according to the altruistic principles laid out therein, they would find it an impossible task. Developing the set of objective and quantifiable metrics necessary to operationalize stakeholder capitalism will prove an intractable problem. Even if the requisite set of metrics could be designed, boundedly rational managers cannot reasonably be expected to balance the huge number of competing factors necessary to account for the varied interests of the firm’s many constituencies.

There are four basic arguments in favor of stakeholder capitalism. (1) It is a necessary response to the externalities generated by corporations. (2) Society expects business to solve problems when governments will not. (3) Corporations have too much power. (4) Millennials will only work for woke corporations. None of these arguments proves persuasive.

Defines the terms corporation, corporate purpose, shareholder value maximization, stakeholders, stakeholder capitalism, corporate social responsibility, and ESG (environmental, social, and governance). Provides the plan of the work.

Stakeholder capitalism results in a loss of accountability, as executives who are responsible to everyone are responsible to no one. Stakeholder capitalism would be extremely difficult to implement. Proposed means of doing so – such as constituency boards, codetermination, and team production – are all unworkable. Stakeholder capitalism is inconsistent with democratic capitalism. Shareholder value maximization is the result that would emerge if shareholder and stakeholders could bargain (the so-called hypothetical bargain). Shareholder capitalism is pro-social. The profit motive results in socially efficient resource allocation. The profit motive is an essential motivational spark for innovation. The profit motive promotes freedom.

Chapter 6 argues that businesses, especially large companies receiving government funding, should expect there to be conditionality attached to this. Other European countries have, unlike the UK, built in to their COVID-19 support packages requirements for environmental targets, protections for jobs and put caps on the interest rates banks can charge on government-backed loans. It will discuss the missed opportunity to secure a payback after the 2008 banking crisis and the moral hazard that the large-scale bailouts engendered. It will suggest that the loosening of monetary policy, both then and now, will, if not managed properly, continue to funnel money to the rich.

It will look at proposals to learn from past mistakes to secure a ‘pandemic payback’, for instance if the government were to take advantage of historically low interest rates to purchase equity stakes in businesses that face challenges but are fundamentally sound. It will look at international voices calling for a fundamental change in how companies are governed so that they serve a broad group of stakeholders, and proposals for changes to the law to make it the duty of directors to promote the long-term success of a company in place of short-term shareholder interest.