The case of Ford v Dodge addresses the issue of how ‘corporate purpose’ is envisioned in the United States, and it seems to draw a fairly direct connection between said purpose and long term profit. The question of how this issue is approached by Canadian courts seems to be addressed in People’s Department Store v Wise. In this case the best interests of a corporation are equated to maximising the value of the company, although this is meant to be understood in a long-term context. However, other factors such as the environment or consumers have been recognized by Canadian courts as other acceptable grounds on which directors of corporations may base business decisions.
However, the question remains whether this interpretation of corporate purpose is appropriate in a Canadian context. It seems fairly clear that the courts are justified in distinguishing corporate purpose in Canada from the definition decided on by American courts due to the vast social and cultural differences between our two nations. However, this is not particularly useful to Canadian courts faced with the decision of what constitutes a legitimate corporate purpose. The fact that there are so many potential purposes other than profit that corporations may serve, as is demonstrated by certain sports franchises, makes this an extremely controversial issue. In fact, the extent of the controversy surrounding this issue may be a signal that legislative codification would be preferable to the current piecemeal common law approach.
Aren’t corporations becoming increasingly internationalized, though? If that is true, how significant are these cultural differences at the national level? Particularly if corporations have the ability to simply up and move into another jurisdiction that is more favorable for their particular needs (“amalgamate”, under BCBCA s 283 terminology), aren’t the principles and values found in other jurisdictions very relevant to Canadian corporate law jurisprudence?
Or, perhaps, even more extremely: can we discern “international” corporate purpose that could help us understand corporations across multiple jurisdictions? The answer may be no, but I think it’s a task worth attempting.
Trying to quantify so many different potential corporate purposes, especially when (as Joey pointed out) considering corporations that exist globally, seems to be almost impossible. Wouldn’t it be easier to just keep the corporate purpose tied to the $$$ bottom line? Environmental concerns, and other social externalities, could be addressed by regulators. This would leave corporations free to focus on achieving profits (while operating within regulatory constraints). Perhaps this would be a way around “the current piecemeal common law approach”?
To comment on the commenters, perhaps in the case of large multinational firms it is more appropriate to tie corporate purpose solely to profit. As you rightly highlight it may be impossible to agree on any other framework and it may be that efficiency dictates that other social concerns be addressed elsewhere.
However, Nick brings up the sports context which makes me think of the Green Bay Packers. They are the only NFL team that is publicly owner, mostly by locals. This arrangement is in fact now banned in the NFL so they are quite unique. I’d be stunned if I were to find out that shareholders in the Packers are primarily interested in profit. For example, if they were offered well above market value for a piece of significant sports memorabilia I’d imagine that they’d absolutely turn it down. Limiting corporate purpose may allow minority and dissenting shareholders the ability to force such sales and ruin what is otherwise a socially beneficial arrangement.
I’d argue that corporate purpose ought to be as broad as corporate rights. If corporations can be involved in health care, why can’t they care about health? Same goes for the environment, immigration, essentially any area of human activity today. I realize that this opens the door to massive corporate fraud on investors and so a statutory framework might need to be worked out but I’d argue that that hurdle is preferable to being bound to the creation of only amoral profit-seeking machines.