Fault Lines in The Intersection Between Corporate Governance and Social Responsability

2002 Corporate Governance and Social Responsibility 515
FAULT LINES IN THE INTERSECTION BETWEEN

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
BRYAN HORRIGAN*
Few trends could so thoroughly undermine the very foundations of our free society
as the acceptance by corporate officials of a social responsibility other than to make
as much money for their stockholders as possible.
—Milton Friedman.*1
Good corporate citizenship is good business practice.

—Mohan Kaul, Director-General of the Commonwealth Business Council, 2001.2
The idea of corporate social responsibility (CSR) poses a threat to free enterprise.
The [so-called] solution is a new model of capitalism based on the principle of
environmentally sustainable development. This is a principle that is ill-defined and
potentially harmful because there is no attempt to recognize the substantial costs
involved and set them against the (often small) benefits. Businesses, most notably
the large MNCs [multinational corporations] most subject to the demands of CSR,
have sought to appease their critics. The greatest potential for harm comes from the
attempt to impose global governance — common international standards across
widely different countries — which can only cripple international trade and
investment flows and hold back the poorest countries.
—Alan Wood, Economics Editor, The Australian?
* Professor, School o f Law, University o f Canberra; Director, National Centre for Corporate Law and
Policy Research (email: bth@management.canberra.edu.au); Deputy Director, National Institute for
Governance; Consultant, Allens Arthur Robinson. Some parts o f this article develop and amplify my
work in: ‘Governance, Liability, and Immunity o f Government Business Enterprises and Their Boards’ in
Michael Whincop (ed), From Bureaucracy to Business Enterprise (2002, forthcoming); ‘Teaching and
Integrating Recent Developments in Corporate Law, Theory, and Practice’ (2001) 13 Australian Journal
of Corporate Law 182; ‘K ey Legal and Governance Issues for Companies and Boards Across the Public
and Private Sectors’ in Current Issues in Public Sector Governance, Monograph for National Institute
for Governance and National Centre for Corporate Law and Policy Research (2002, forthcoming).
Thanks to the two anonymous referees for their constructive criticisms and suggestions. A ll responsibility
remains mine.
1 Milton Friedman, Capitalism and Freedom (first published 1962, 1982 ed) 133.
2 Lenore Taylor, ‘Common Interests’, Boss, Australian Financial Review (Sydney), 10 August 2001, 14.
3 Alan W ood, ‘To Thrive, Capitalism Needs Room to Breathe’, The Australian (Sydney), 15 M ay 2001,
11.
516 UNSWLaw Journal Volume 25(2)
I OVERVIEW
D o co m p a n ies h a v e s o c ia l c o n s c ie n c e s or is that treatin g th em w r o n g ly , as

m oral agen ts, lik e h um an b e in g s? W h at im p a ct d o e s th e le g a l and m oral status o f
co m p a n ies h a v e o n th eir so c ia l r e sp o n sib ilitie s? O n a sy ste m ic v ie w b e y o n d
in d iv id u a l c o m p a n ies, is it true that ‘c a p ita list e c o n o m ie s ca n n o t w o r k w ith o u t a
m oral fo u n d a tio n [and] w ith o u t a “critica l m a ss” o f m oral p e o p le ru n nin g
th e m ’?4 A r e th e b e st in terests o f a corp oratio n and its sh a reh o ld ers u ltim a tely
and p red o m in a n tly fin a n c ia l in term s o f sh ares and p ro fita b ility , or is that to o
red u ctio n ist and sim p listic ? C an b u sin e ss c h o o s e p ro fits and p e o p le o r m u st it
c h o o s e c o n sta n tly b e tw e e n p rofits over p e o p le or p e o p le over p ro fits? H o w
m ig h t a n y corp orate so c ia l r e sp o n sib ilitie s b e in teg ra ted w ith g o o d
o rg a n isa tio n a l g o v ern a n ce? W h at d o e s it m ea n to b e a ‘triple b o tto m lin e ’
o rg an isation ?5 Is there an y c o n n e c tio n b e tw e e n recen t corp orate c o lla p se s and
in a d eq u a cies in m e e tin g corp orate s o c ia l r e sp o n sib ilitie s? 6
A ll o f th e se q u e stio n s r e v o lv e around th e lin k s b e tw e e n corporate g o v er n a n ce
and corporate r e sp o n sib ility . T h o se lin k s are im portant, as n o t a ll o f th e
corp orate g o v er n a n ce reform su g g e stio n s em erg in g in th e lig h t o f corporate
c o lla p s e s lik e E nron, H IH and O n e .T e l ad dress w id e r n o tio n s o f corporate so c ia l
re sp o n sib ility . T h e fed era l g o v e r n m e n t’s su g g e ste d reform s o n corporate
d isc lo su r e and au dit reg u la tio n — th e la test in sta lm en t o f its C orporate L a w
E c o n o m ic R e fo r m P rogram ( ‘C L E R P 9 ’) — fit th is d escrip tio n . E q u a lly , m u ch
rem ain s to b e d o n e in tran slatin g th e id e a ls o f corporate s o c ia l r e sp o n sib ility into
so m e th in g that b oth m e a n in g fu lly relates n o n -sh a reh o ld er in terests to corporate
co n ce rn s and tran slates ‘trip le b o tto m lin e ’ th in k in g in to m e a n in g fu l s o c ia l,
o rg a n isa tio n a l and in d iv id u a l in d icators o f p erfo rm a n ce and w e ll-b e in g .
A c c o r d in g ly , th is article fo c u s e s o n so m e k e y fau lt lin e s in th e in terse ctio n
b e tw e e n corp orate g o v er n a n c e and corporate s o c ia l r e sp o n sib ility . It ex p lo r e s
so m e w a y s in w h ic h a sh a reh o ld er-b a sed fo c u s ca n u n d erv a lu e th e im p o rta n ce o f
n o n -sh a reh o ld er in terests o n v a rio u s le v e ls. It a lso e x p lo r e s h o w a sta k eh o ld er-
b a se d fo c u s ca n b e d e fic ie n t i f it d o e s n o t ju s tify th e lin k b e tw e e n n o n
sh areh old er in terests and corp orate re sp o n sib ilitie s. F in a lly , it o ffe r s so m e
p ra ctica l su g g e stio n s for b etter a lig n in g corporate g o v er n a n ce to ‘trip le b o tto m
lin e ’ in d icators. T h e clea r th em es ru n n in g th rou gh th is a rticle can b e stated
b riefly . C orporate g o v er n a n ce is m o v in g g rad u a lly b ut h ap h azard ly in a d irectio n
w h ic h is m ore, rather than le ss, fa v o u ra b le to n o tio n s o f corp orate so c ia l
r e sp o n sib ility an d ‘trip le b o tto m lin e ’ p erform an ce. M o n o -d im e n sio n a l v ie w s o f
corp orate in terests in term s o f a ze r o -su m ap proach to sh a reh o ld er and
sta k eh old er in terests, in w h ic h a g a in for o n e is a lo s s fo r th e other, are
4 Miranda Devine, ‘The Moral Pygmies Who Run the B ig End o f Town’, Sun-Herald (Sydney), 21 July
2002, 15.
5 The ‘triple bottom line’ is commonly contrasted with the ‘(single) bottom line’ o f financial indicators
like profit-maximisation, to focus attention on a company’s performance on three different levels —
namely, economic, social, and environmental performance.
6 See, eg, Rick Sarre, ‘Responding to Corporate Collapses: Is There a Role for Corporate Social
Responsibility?’ (2002) 7 Deakin Law Review 1.
in a d eq u ate to m e e t th e c o m p le x itie s o f coxporate re g u la tio n and g o v er n a n ce . T h e

d e v e lo p m e n t and a lig n m en t o f ad eq u ate e c o n o m ic and n o n -e c o n o m ic in d ica to rs
a cr o ss so c ie ta l, org a n isa tio n a l and p erso n a l p erfo rm a n ce le v e ls is n e c e ssa r y to
e m b e d ‘trip le b o tto m lin e ’ liter a cy in regu latory and corp orate th in k in g and
p ra ctice.7
T h e rela tio n sh ip b e tw e e n corp orate g o v er n a n ce and s o c ia l re sp o n sib ility
su g g e sts te n sim p le b u t p o w e r fu l starting p o in ts fo r th is a rticle. F irst, as a h um an
en terp rise, cap ital is n o t m o n o -d im e n sio n a l. R ather, it a lso e n c o m p a sse s
e c o n o m ic cap ital, h um an cap ital, m oral cap ital, in te lle c tu a l ca p ita l, s o c ia l cap ital
an d en v iro n m en ta l cap ital. S e co n d , a s sh o w n b y th e corp orate d isa sters in v o lv in g
E nron, W o rld C o m , O n e .T e l an d H IH (a m o n g o th ers), th e e x p lo ita tio n o f
fin a n c ia l cap ital h ap p en s w ith in a regu latory sy ste m b a se d o n trust b e tw e e n
m arket p articip an ts, e s p e c ia lly in term s o f b oard d y n a m ic s, m arket in fo rm a tio n ,
and corporate rep ortin g and d isc lo su re . T hird, eq u a l a tten tion to s o c io e c o n o m ic
and en viro n m en ta l cap ital, as u rged b y ‘trip le b o tto m lin e ’ a d v o ca te s, re v e a ls th e
d eep er c o n n e c tio n s and sy m b io tic rela tio n sh ip s b e tw e e n th e v a rio u s form s o f
cap ital. F ourth, a resp e cta b le b o d y o f a ca d em ic and b u sin e ss o p in io n
in c r e a sin g ly v ie w s corporate g o v er n a n ce and th e b o tto m lin e n o t o n ly in term s o f
c o m p lia n c e , sh areh old er in terests and p ro fits, b u t a lso in term s that m ak e th o se
th in g s in terd ep en d en t w ith oth er so c ie ta l in terests. F ifth , th is m ea n s that,
in c rea sin g ly , m o d e m corporate g o v er n a n c e co n sid e rs d im e n sio n s broad er than
c o n v e n tio n a lly th ou gh t or p ractised . It fo c u s e s o n d e liv e r in g d ifferen t b ut
in terd ep en d en t o u tc o m e s for sh areh old ers and sta k eh o ld ers in re sp o n se to
regu latory, en viron m en tal, and s o c io e c o n o m ic d y n a m ics and c h a lle n g e s, as
o p p o se d to fo c u s in g sim p ly o n lin ea r c o n n e c tio n s b e tw e e n co m p a n ies, p ro fit
m ak in g, sto c k v a lu e s and sh areh old er returns in iso la tio n . T h is in terd ep en d en ce
b e tw e e n sh areh old er and stak eh old er in terests, o n th e o n e hand , an d b e tw e e n th e
d iffer en t regu latory, fin a n c ia l, s o c io e c o n o m ic and en v iro n m en ta l co m p o n en ts o f
th e corporate b o tto m lin e , o n th e other, is a k e y in flu e n c e refram in g id e a s ab out
th e rela tio n sh ip b e tw e e n co m p a n ies, sh areh old ers, sta k eh o ld ers an d so c ie ty .
S ix th , th is b road en in g o f th e d im e n sio n s and e lem en ts o f corporate
g o v er n a n ce a lso m ean s tak in g a m o re c o m p le x v ie w o f th e d iffer en t d im e n sio n s
o f ca p ita l and th eir in teraction s. S ev en th , w h ile m u ch fu z z y th in k in g surrounds
th e u n d erestim a tio n b y so m e b u sin e sse s and th e o v e r estim a tio n b y so m e so c ia l
a c tiv ists o f th e im p act o f s o c io e c o n o m ic and en v iro n m en ta l fa cto rs u p o n th e
fin a n c ia l b o tto m lin e fo r co m p a n ies, refram in g b o th the n o tio n o f a b o tto m lin e
an d th e rela tio n b e tw e e n its c o m p o n en ts is n e c e ssa r y to m e e t th e n e w a w a ren ess
o f th is in terd ep en d en ce b e tw e e n d iffer en t form s o f ca p ita l and b e tw e e n th e
in terests o f sh areh old ers and stak eh old ers in corporate g o v ern a n ce. In crea sin g ly ,
7 While this article touches on som e o f the broader philosophical debates about the ultimate purpose and
responsibility o f corporations as social entities as part o f its exposition o f the limits o f ‘either-or’
dichotomies like favouring shareholder interests over stakeholder interests, viewing corporations in
contractarian or communitarian terms, and choosing profits over people, it does not revisit these debates
afresh. Rather, its starting points position it within the body o f scholarship which assumes the
importance o f corporate social responsibility and explores its thematic and operational connections to
corporate governance.
rh etorical b a ttles fram ed in sim p le term s o f a pure d ic h o to m y or co m p e titio n

b e tw e e n sh areh old er-cen tred fin a n c ia l ca p ita l and sta k eh o ld er-cen tred
s o c io e c o n o m ic cap ital are b o x in g at sh a d o w s. T h e im p ortan t is s u e s lie
e lse w h e r e , fram ed in term s o f a n etw o r k o f in terd ep en d en t fa cto rs and
rela tio n sh ip s su p p ortin g p ro fita b ility , sh a reh o ld er v a lu e and b u sin e ss
su sta in a b ility . E igh th , th e r ise and sig n ific a n c e o f d ifferen t fo rm s o f reg u la tio n
su g g e sts w h a t so m e c a ll a ‘quadruple b o tto m lin e ’ em p h a sis fo r co m p a n ies. T h is
fo c u s e s o n th e d y n a m ic in teraction b e tw e e n c o m p o n en ts w h ic h c o v e r fin a n cia l,
so c io e c o n o m ic , and en viron m en tal c o n ce rn s, as w e ll as g o v er n a n ce and
regu latory c o n c e r n s.8 T h e d im e n sio n s o f corp orate g o v e r n a n c e m u st
a cco m m o d a te su ch sh ifts in th ou gh t an d a ctio n . N in th , e ffe c tiv e corporate
c itiz e n sh ip n e e d s th e stim u lu s o f a co o rd in a ted le g is la tiv e , co -reg u la to ry and
self-reg u la to ry r e sp o n se to th e rela tio n sh ip b e tw e e n co m p a n ies, sh areh old ers,
sta k eh old ers and so c ie ty . F in a lly , th e c h a lle n g e rem a in s to d e v e lo p an d translate
m e a n in g fu l in d ica to rs o f so c ia l and e c o n o m ic p ro sp erity in to m e a n in g fu l
p erfo rm a n ce m e a su res at o rg a n isa tio n a l and in d iv id u a l le v e ls as part o f th e
im p lem en ta tio n o f g o o d gov ern a n ce.
II GLOBAL AND IDEOLOGICAL DEBATES
B o th th e g lo b a l la n d sca p e and th e corporate m in d se t are c h a n g in g from

w h o lly ec o n o m ic a lly -c e n tr e d d e c isio n -m a k in g to d e c isio n -m a k in g b a se d o n a
w id e r h o rizo n o f in tegrated in terests. F uturist R o b ert T h e o b a ld p u ts th e sh ift
starkly:
the required success criteria for the twenty-first century are ecological integrity,
effective decision-making, and social cohesion. These are progressively replacing
current commitments to economic growth, compulsive consumption, and
international competition.
This change in success criteria will necessarily occur at the personal, group, and
community level rather than through top-down policy shifts.9
A t p resen t, so m e p u b lic an d p o litic a l c o n c e p tio n s o f co rp o ra tio n s and th eir
in terests are fram ed in n arrow , o n e -d im e n sio n a l term s o f se lf-in te r e st and profit,
as w h e n th e b a sic d u ty o f d irectors to act in a co m p a n y ’s b e st in terests is
tran slated s o le ly into m a x im isin g sh are v a lu e and d iv id en d s fo r sh areh old ers.
M o r eo v er , e x e c u tiv e s and m an agers o f g o v er n m en t co rp o ra tio n s and n o n
g o v ern m en t corp oration s a lik e are p e r c e iv e d p u b lic ly and in b oa rd ro o m s as
b e in g p r e o c c u p ie d s o le ly or p red o m in a n tly w ith ‘th e b o tto m lin e ’, m ea su red
la rg ely or w h o lly in term s o f p rofit m a x im isa tio n , sh are p rices, and fin a n cia l
returns to sh areh old ers, and c lo th e d so m e tim e s in rh etoric ab out b u sin e ss
su sta in a b ility and sh areh old er v a lu e . H o w ev e r, i f th e in terests o f b o th
sh areh old ers and n on -sh a reh o ld ers are m u lti-d im en sio n a l and th o se in terests are
in terd ep en d en t, and i f corp oration s in v o lv e a m a n a g ed n etw o r k o f intern al and
ex tern al rela tio n sh ip s w h ic h r e fle c t su c h re a litie s, th e b e s t in terests o f
8 See, eg, Pat Barrett, Concluding Remarks from The Future Direction o f Audit — A National Audit Office
Perspective (2002), <http://www.anao.gov.auAVebSite.nsf/Publications> at 16 August 2002.
9 Robert Theobald, Reworking Success: New Communities at the Millennium (1997) 3.
co rp o ration s and th eir sh areh old ers can n ot b e structured o n e -d im e n sio n a lly in a
lin ea r rela tio n sh ip b e tw e e n m an agers and o w n ers. A te n sio n still e x is ts in p u b lic
and a ca d em ic d eb ate b e tw e e n th e h arsh r e a litie s o f corporate reg u la tio n ,
d ir ecto rs’ d u ties, p ro fit-m a k in g and sh areh old er returns, o n th e o n e hand , and the
id e a ls o f th e m o v e m e n t tow ard s ‘so c ia l ch arters’, ‘trip le b o tto m lin e s ’, and oth er
in d ica tors o f corporate citiz e n sh ip and s o c ia l re sp o n sib ility , o n th e other. In deed ,
recen t A u stra lia n su rv ey s su g g e st a lo w le v e l o f u n d ersta n d in g in th e b u sin e ss
c o m m u n ity o f w h at it r e a lly m ean s in p ra ctice to b e c o m e a ‘trip le b o tto m lin e ’
co r p o r a tio n .10
T h e d eb ate ab ou t corporate c itiz e n sh ip is p o sitio n e d w ith in a w id er
id e o lo g ic a l and g lo b a l d eb ate, a lth o u g h o n e m ig h t n o t g u e ss th is fro m th e h e a v y
em p h a sis in A u stra lia n corporate an d p o litic a l d eb a te o n m atters su ch as
m in im isin g gov ern m en ta l reg u la tio n o f b u sin e ss, m a x im isin g sh areh old er v a lu e ,
p ro m o tin g in v e sto r secu rity , c a tch in g corp orate re n e g a d e s, en h a n cin g
co m p e titio n , creatin g b u sin e ss su sta in a b ility and re sp o n d in g to m arket n eed s.
In tern ation ally, o n o n e v ie w , th is is part o f a m u ch w id e r d iv e rg en ce in v ie w s
b e tw e e n tw o tran sn ation al m o v e m e n ts — th e corporate g lo b a lisa tio n m o v e m en t
and th e liv in g d em o c ra cy m o v e m e n t.11 U n d er th is v isio n , th e corporate
g lo b a lisa tio n m o v e m e n t c o m p r ise s an a llia n c e b e tw e e n th e w o r ld ’s la rg est
co rp o ration s and m o st p o w erfu l gov ern m en ts. T h e p u rp o se o f th is a llia n ce , it is
sa id , is:
to integrate the world’s national economies into a single, borderless global economy
in which the world’s mega-corporations are free to move goods and money
anywhere in the world that affords an opportunity for profit, without governmental
interference.12
A n a n cilla r y a im o f th is a llia n c e is to p riv a tise p u b lic s e r v ic e s and a sse ts as
w e ll as stren gth en safegu ard s for in v esto rs and p riv a te property. Its p ro p o n en ts
ju s tify its e x p a n sio n as
the result of inevitable and irreversible historical forces driving a powerful engine of
technological innovation and economic growth that is strengthening human
freedom, spreading democracy, and creating the wealth needed to end poverty and
save the environment.13
In con trast, th e liv in g d em o c ra cy m o v e m e n t c o m p r ise s a ‘n e w ly em erg in g
g lo b a l m o v e m e n t a d v a n c ed b y a p lan etary c itiz e n a llia n c e o f c iv il s o c ie ty
o r g a n isa tio n s’14 w h o b e lie v e that:
corporate globalisation is neither inevitable nor beneficial, but rather the product of
intentional decisions and policies promoted by the World Trade Organization, the
World Bank, the IMF, global corporations, and politicians who depend on corporate
money.15
10 John Arbouw, ‘Corporate Citizenship: More Than a Good Idea’ (2001) 17(4) Company Director 14, 15,
discussing a study by the Corporate Citizenship Research Unit at Deakin University.
11 See David Korten, When Corporations Rule the World (2nd ed, 2001) 4 -5 .
12 Ibid.
13 Ibid.
14 Ibid.
15 Ibid.
520 UNSW Law Journal Volume 25(2)
It is further sa id that:
corporate globalisation is enriching the few at the expense of the many, replacing
democracy with rule by corporations and financial elites, destroying the real wealth
of the planet and society to make money for the already wealthy, and eroding the
relationships of trust and caring that are the essential foundation of a civilised
society.16
O n th is v ie w , citiz e n sh ip and in d iv id u a l-cen tred o rien ta tio n s are, for
co rp oration s and g o v ern m en ts a lik e, d isp la c e d b y narrow e c o n o m ic m eth o d s o f
a s s e s s in g in d iv id u a l w orth and o rg a n isa tio n a l p erfo rm a n ce as w e ll as b y th e
in stitu tio n a l im p a ct o f g lo b a lisa tio n , corp oratism and m a n a g eria lism .
O f co u rse, oth er ch aracterisation s are p o s s ib le in d escr ib in g th e co m p e titio n
b e tw e e n e c o n o m ic an d n o n -e c o n o m ic in terests, m o tiv a tio n s, and re sp o n sib ilitie s
fo r g o v ern m en ts, b u sin e ss and th e co m m u n ity . F o r ex a m p le, so m e
ch aracterisation s turn o n the te n sio n b e tw e e n e c o n o m ic and so c io -e n v iro n m e n ta l
in terests, w h ile oth ers v ie w th e te n sio n as b e in g b e tw e e n sh a reh o ld er and w id er
sta k eh old er in terests. O f co u rse , fram in g e c o n o m ic and so c ia l in terests in
o p p o sitio n a l term s ig n o r es th eir ca p a city to a cc o m m o d a te ea c h other. N o r is
th ere a sim p le con trast b e tw e e n sh areh old ers and sta k eh o ld ers, g iv e n the
m u ltip le ‘h a ts’ w o r n b y b o th in d iv id u a l an d in stitu tio n a l sh a reh o ld ers, as w e ll as
th e q u a lita tiv e ly d ifferen t in terests o f ‘in n er c ir c le ’ sta k eh o ld ers lik e e m p lo y e e s,
cu sto m ers an d cred itors com p ared to ‘ou ter c ir c le ’ sta k eh o ld ers lik e regu lators,
in terest grou p s an d th e w id er c o m m u n ity .17 M u c h o f th is d eb ate is r e fle c te d in
th e d istin c tio n b e tw e e n ‘sin g le b o tto m lin e ’ th in k in g, o n th e o n e hand, and ‘triple
b o tto m lin e ’ th in k in g and corp orate s o c ia l r e sp o n sib ility o n th e other.
D o th e b est in terests o f corp oration s and sh a reh o ld ers eq u a te sim p ly to p ro fit-
m a x im isa tio n , share v a lu e s and fin a n c ia l returns to sh a reh o ld ers? W h en w e
ex a m in e c lo s e ly th e w a y s in w h ic h th e la w reg u la te s d ir e c to r s’ d u ties, w e fin d
th e o verrid in g regu latory ration ale is to p ro m o te d irectors and oth er o ffic e r s
a ctin g in th e b e st in terests o f th e co m p a n y o v era ll. T h e real q u e stio n is w h a t that
p rim ary d ir ectiv e tran slates into in p ra ctice. C o n v e n tio n a lly , th e b e s t in terests o f
th e co m p a n y eq u ate r o u g h ly to th e b e s t in terests o f th e sh a reh o ld ers, and that in
turn u su a lly translates in to p ro fita b ility , en h a n c ed share p rice and d iv id en d s. Y e t
that a ssu m e s m u ch ab ou t th e ‘r ig h t’ c o n c e p tio n o f a co rp oration in le g a l term s,
e s p e c ia lly in term s o f a c o m p a c t b e tw e e n a corp o ra tio n and its m em b ers,
reg a rd less o f oth er in terests (in c lu d in g w id e r sta k eh o ld ers).
W h y is p o litic a l d eb ate ab ou t corp orate and p u b lic affa irs s o lim ite d in its
fo c u s and so b lin k ere d in its u n c ritica l a cc ep ta n ce o f p r e v a ilin g d o g m a in
corporate reg u la tio n and corporate and le g a l p ra ctice? S o m e co m m en ta to rs argue
that th e n e w p o litic s o f la w and g o v ern m en t in v o lv e m a x im isin g b u sin e ss and
m arket in terests and m in im isin g p o litic a l and corporate r e sp o n sib ility fo r so c ia l
w e ll-b e in g . F or ex a m p le, A u stra lia n corporate reg u la tio n tra d itio n a lly v ie w s
16 Ibid.
17 A s David M illon notes, the analytical potency o f the ‘stakeholder’ concept is diluted even to the point o f
merger with theories o f corporate social responsibility the more that it is broadened to include anyone
affected by coiporations in some way: see David M illon, ‘N ew Game Plan or Business as Usual? A
Critique o f the Team Production Model o f Corporate Law’ (2000) 86 Virginia Law Review, 1001, 1002.
c o m p a n ie s m a in ly in term s o f m a x im isin g p ro fits and sh a reh o ld er returns rather

than b u ild in g s o c ia l ca p ita l, as i f th o se in terests are m u tu a lly e x c lu s iv e . O n a
m o re rigorou s le v e l o f sch o la rsh ip , p h ilo so p h ic a l argum ent co n tin u e s a m o n g st
corporate p h ilo so p h e r s ab ou t th e rela tio n a l, contractarian, e c o n o m ic and oth er
ju risp ru d en tial ra tio n a les for corporate la w and re g u la tio n .18 R e c e n t sch o la rsh ip
c h a lle n g e s in te lle c tu a ls to q u e stio n th e ex ten t to w h ic h th eir o w n sch o la rsh ip and
w o r k is w h o lly b u sin e ss-o r ie n ta ted and u n critical, sim p ly ser v in g th e m an agerial
in terests o f v o c a tio n a l train in g and tech n o cra tic cr ed en tia lism in u n iv e r sitie s19 as
w e ll as th e e c o n o m ic and m arket in terests o f b u sin e ss a s part o f th e
fin a n c ia lisa tio n o f p u b lic p o lic y in th e n e w p o litic s o f la w and g o v er n m en t.20
I ll LINKING SOCIOECONOMIC INTERESTS TO CORPORATE

GOVERNANCE
N e ith e r o rg a n isa tio n s n or in d iv id u a ls are lik e ly to tak e corp orate so c ia l

r e sp o n sib ility se r io u sly a s part o f th eir co r e b u sin e ss u n le s s it is e ffe c tiv e ly
in teg ra ted w ith in corp orate g o v ern a n ce. T h is is an im portant co n n ectio n .
C orporate g o v er n a n ce is o n e o f th o se fu n d am en tal y e t n eb u lo u s c o n c e p ts w h ic h
m a n y c la im to u n d erstan d and im p lem en t b u t w h ic h fe w ca n d e fin e
c o m p r e h e n siv e ly or e v e n s u c c in c tly .21 H isto r ic a lly , corporate g o v er n a n ce has
so m e tim e s n arrow ly b e e n c o n c e iv e d sim p ly in term s o f ‘th e re la tio n sh ip s
b e tw e e n th e firm ’s cap ital p rovid ers and top m an agers a s m e d ia te d b y its b oard
o f d ir e c to r s’.22 T o d a y , it is d e fin e d v a r io u sly in term s o f structures and
p r o c e s s e s , d ir ectio n an d con trol, su b sta n tiv e ele m e n ts lik e p erfo rm a n ce and
c o m p lia n c e , or m a n a g in g th e m u ltip lic ity o f intern al and ex tern a l corporate
re la tio n sh ip s. In b o th re g u la tio n and p ra ctice, m ore em p h a sis is o fte n p la c e d o n
corporate g o v er n a n ce in th e n arrow se n se o f th e rela tio n sh ip b e tw e e n a
c o m p a n y ’s sh areh old ers, m an agers and d irectors than o n corporate g o v er n a n ce
18 See, eg, Stephen Bottomley, ‘Book Review — Reinventing Aristocracy: The Constitutional Reformation
o f Corporate Governance by Andrew Fraser’ (1999) 11 Australian Journal of Corporate Law 115;
Stephen Bottomley, ‘The Birds, the Beasts, and the Bat: Developing a Constitutionalist Theory o f
Corporate Regulation’ (1999) 27 Federal Law Review 243; Sandra Bem s and Paula Baron, Company
Law and Governance: An Australian Perspective (1998).
19 Margaret Thornton, ‘Law as Business in the Corporatised University’ (2000) 25 Alternative Law
Journal 269.
20 D Fleming, ‘Legal Pluralism, Renner, and Understanding the N ew Politics o f Law in Market Capitalism’
(Paper presented at the Conference on Law and Social Theory, Oxford, 14-15 December 2000).
21 For recent Australian discussions o f corporate governance from legal and comparative perspectives, see
Andrew Clarke, ‘The Business Judgment Rule — Good Corporate Governance or Not?’ (2000) 12
Australian Journal o f Corporate Law 85; Roman Tomasic, ‘Good Corporate Governance: The
International Challenge’ (2000) 12 Australian Journal o f Corporate Law 142; Shaun Clyne, ‘M odem
Corporate Governance’ (2000) 11 Australian Journal o f Corporate Law 276; James M cConvill,
‘Ensuring Balance in Corporate Governance: Parts 2F.1 and 2F.1A o f the Corporations A ct’ (2001) 12
Australian Journal o f Corporate Law 293; David Knott, ‘Corporate Governance — Principles,
Promotion and Practice’ (Speech delivered at the Monash Governance Research Unit (Inaugural
Lecture), Melbourne, 16 July 2002).
22 Michael Bradley et al, ‘The Purposes and Accountability o f the Corporation in Contemporary Society:
Corporate Governance at a Crossroads’ (1999) 62 Law and Contemporary Problems 9, 10-11.
in a n y w id e r se n se o f r e sp o n sib ility to sta k eh o ld e rs.23 O f co u rse, th ere is a lso a

n e e d to d istin g u ish b e tw e e n th e d ifferen t nature and req u irem en ts o f ‘p u b lic
g o v e r n a n c e ’ (ie , g o v er n a n ce as it rela tes to g o v ern m en ts and th e g o v er n a n ce and
reg u la tio n o f co m m u n itie s), ‘o rg a n isa tio n a l g o v e r n a n c e ’ (ie , th e g o v er n a n ce o f
o rg a n isa tio n s g e n e r a lly and n o t ju st corporate b o d ie s , in b o th th e p u b lic and
p rivate sec to rs), ‘corp orate g o v e r n a n c e ’ (ie , th e g o v er n a n ce o f g o v ern m en ta l and
n o n -g o v ern m e n ta l corporate e n tities, in fo rm ed sig n ific a n tly b y p riv a te sec to r
ex p e r ie n c e o f b oard s and corp oration s) and ‘p erso n a l g o v e r n a n c e ’(ie , m a n a g in g
g o v er n a n ce at th e in d iv id u a l le v e l, in c lu d in g tra n sla tio n o f o rg a n isa tio n a l
g o v er n a n c e co n ce rn s, strategies and p erfo rm a n ce in d ica to rs into m atters o f
in d iv id u a l r e sp o n sib ility w ith in o rg a n isa tio n s).
In th e p rivate secto r, corp orate g o v er n a n ce is o fte n d isc u sse d in term s o f th e
co re areas o f b oard r e sp o n sib ility : strategy, p erfo rm a n ce, re so u rces,
co n fo r m a n ce (e g , c o m p lia n c e ) and a cc o u n ta b ility (to sh a reh o ld ers). Ian D u n lo p ,
th e C E O o f th e A u stralian In stitu te o f C o m p a n y D ire cto r s, u s e fu lly ch aracterised
th e se co r e areas in th e fo llo w in g term s:
• strategy, to p articip ate w ith m a n a g em en t in se ttin g th e g o a ls, stra teg ies
and p erform an ce targets for th e enterprise;
• performance', to m on itor th e p erfo rm a n ce o f th e en terp rise a g a in st its
b u sin e ss stra teg ies and targets, with the objective o f enhancing its
prosperity over the long term',
• resources: to m ak e a v a ila b le to m a n a g em en t th e re so u r c e s to a c h ie v e the
strategic p la n - th e m o n e y , m an a g em en t, m a n p o w er an d m aterials;
• conformance: to en su re th ere are ad eq u ate p r o c e s s e s to c o n fo r m w ith
le g a l req u irem en ts and corporate g o v er n a n ce standards, and that risk
e x p o su res are a d eq u a tely m an aged ; and
• accountability to shareholders: to report p ro g ress to th e sh a reh o ld ers as
th eir a p p o in ted rep resen ta tiv es, and se e k to a lig n th e c o lle c tiv e in terests o f
sh areh old ers, board s and m a n a g e m e n t.24
T h is is n o t th e o n ly c o n ce p tu a l m ap a v a ila b le. C orporate g o v er n a n ce in th e
p u b lic and p rivate se c to rs h a s a n u m b er o f oth er d im en sio n s. T h e se ad d itio n a l
e le m e n ts are o u tlin e d in th e fram ew ork su g g e ste d b elo w :
(1 ) M is s io n gov ern a n ce;
(2 ) O w n ersh ip g o v er n a n ce , eg , ‘o w n e r s’ and m u ltip le a g e n c ie s and
c o n stitu en cies;
(3 ) Structural g o v er n a n ce , eg , tw o -tiere d w a tc h d o g an d g o v er n a n ce boards;
(4 ) S trategy g o v er n a n ce , eg , corporate p la n s fo r g o v ern m en t b u sin e ss
en terp rises;
23 On these narrow and broad senses o f corporate governance, see Zenichi Shishido, ‘Japanese Corporate
Governance: The Hidden Problems o f Corporate Law and Their Solutions’ (2000) 25 Delaware Journal
o f Corporate Law 189, 193 (fn 6).
24 Ian Dunlop, ‘Governance and Related Issues: Some International Perspectives’ (Speech delivered to the
IPAA/ANAO/ASCPA Seminar on Corporate Governance, Canberra, 30 July 1999); Ian Dunlop,
‘Broadening the Boardroom’ (Speech delivered at the Federation o f Australian Scientific and
Technological Societies National Forum, National Press Club, Canberra, 2 August 2000).
(5 ) P erform an ce g o v er n a n ce , b o th o r g a n isa tio n a lly and in d iv id u a lly ,

e n c o m p a ssin g p r o c e ss, o u tc o m e s and m easu res;
(6 ) C o n fo rm a n ce g o v er n a n ce , in c lu d in g co m p lia n c e , d u e d ilig e n c e , fin a n cia l
risk m a n a g em en t an d le g a l risk m an agem en t;
(7 ) D e c isio n -m a k in g g o v er n a n ce , in c lu d in g intern al an d ex tern a l rela tio n sh ip
m a n a g em en t and com m u n ica tio n ;
(8 ) P rim ary a cc o u n ta b ility g o v er n a n ce (o w n e r s and sh areh old ers);
(9 ) S eco n d a ry a c c o u n ta b ility g o v er n a n ce (sta k eh o ld ers); and
(1 0 ) V a lu e -c a p ita l en h a n cem en t, in c lu d in g lo n g -term su sta in a b ility o f v a rio u s
form s o f corporate cap ital, as w e ll as ‘trip le b o tto m lin e ’ em p h a sis on
e c o n o m ic , en viro n m en ta l and so c ia l ca p ita l.25
O f co u rse, ele m e n ts relatin g to corp orate s o c ia l r e sp o n sib ility are n o t co n fin e d
to th e latter d im e n sio n a lo n e b ut cu t a cr o ss oth er g o v er n a n ce d im e n sio n s to o .
O n e w e a k n e ss o f m a n y su ch lists o f th e e lem en ts, co n ce p ts, or d im e n sio n s o f
corporate g o v er n a n ce is th e a b se n c e o f sy n ch ro n ic ity b e tw e e n th e co m p o n en ts in
th e list. It is o n e th in g to id e n tify c o m p o n en ts o f g o v er n a n ce an d an oth er th in g
a lto g eth e r to sh o w h o w th o se co m p o n e n ts relate to o n e another. A lle n s A rthur
R o b in so n partner S te v e n C o le su g g e sts a w o r k in g d efin itio n o f corporate
g o v er n a n c e w h ic h sy n c h ro n ise s, in tegrates, and o th er w ise a lig n s th e v a rio u s
c o m p o n en ts. H is p referred d e fin itio n is:26
The SYSTEMS AND PROCEDURES by which corporations are controlled and
governed, involving the roles of:
• the Board;
• individual directors;
• senior executives;
and their CULTURAL INTERFACE with:
• one another;
• management generally;
• shareholders;
• other stakeholders;
to deliver ACCOUNTABLE CORPORATE PERFORMANCE in accordance with
the corporation’s GOALS AND OBJECTIVES.
G iv e n m y o w n v ie w o f th e d im e n sio n s o f g o v er n a n ce , I w o u ld in corp orate
C o le ’s d e fin itio n (a lo n g w ith th e v ie w s o f g o v er n a n ce co m m en ta to rs lik e K ie l
and M ills ) in th e f o llo w in g fo rm u lation o f a d e fin itio n o f corp orate and
25 Other candidates for express mention in such a list include ‘people’, ‘leadership’ and ‘ethics’. They are
implicit within one or more o f these identified dimensions o f governance, but others might regard them
as dimensions o f governance in their own right.
26 Steven Cole, ‘D eveloping Trends in Corporate Governance and Director D uties’ (Paper presented at the
IQPC Conference on Performance Measures for Corporate Governance, Sydney, 2 5 -2 6 February 2002).
o rg a n isa tio n a l g o v er n a n ce w h ic h em p h a sise s th e lin k a g es b e tw e e n its v a rio u s

co m p on en ts:
Through ongoing SHARED UNDERSTANDING AND AWARENESS-RAISING,
organisations achieve good corporate governance by ALIGNING,
SYNCHRONISING, AND INTEGRATING the various STRUCTURES,
SYSTEMS, PROCESSES, PRACTICES, AND PLANS by which the organisation
is DIRECTED, CONTROLLED, AND MANAGED (ie, GOVERNED), involving
the collective and individual ROLES AND RESPONSIBILITIES of:
• the Board;
• individual directors;
• senior executives and managers; and
• staff
and their CULTURAL INTERFACE AND RELATIONSHIPS with:
• one another;
• management generally;
• shareholders;
• ‘inner circle’ stakeholders (ie, employees, customers, creditors, financiers); and
• ‘outer circle’ stakeholders (ie, regulators, industry peers, governments, and the
community);
to deliver:
• TRANSPARENT, MEASURABLE, AND ACCOUNTABLE CORPORATE
PERFORMANCE; and
• SUSTAINABLE VALUE-CAPITAL ENHANCEMENT;
for the organisation’s SHAREHOLDERS AND STAKEHOLDERS by meeting
challenges, exploiting opportunities, and managing risks derived from:
• politico-regulatory factors;
• financial factors;
• socioeconomic factors; and
• environmental factors;
in accordance with the corporation’s GOALS, OBJECTIVES, AND STRATEGIES
in customised ways which translate to all organisational levels and which are
effectively MONITORED, EVALUATED, AND REPORTED.27
In th is w a y , o rg a n isa tio n a l and in d iv id u a l g o v er n a n ce r e sp o n sib ilitie s
in tegrate p o litic o -re g u la to r y , fin a n c ia l, s o c io e c o n o m ic and en v iro n m en ta l
c o n ce rn s in a h o lis tic w a y w h ic h flo w s th rou gh to stra teg ic p la n n in g ,
p erfo rm a n ce and corporate o u tc o m e s. In d eed , th is in teg ra tio n o f regu latory,
fin a n c ia l, s o c io e c o n o m ic and en viro n m en ta l co n ce rn s is o n e th in g p rom p tin g
s o m e co m m en ta to rs to su g g e st that corporate g o v er n a n ce sh o u ld b e m o v in g from
‘sin g le b o tto m lin e ’ and ‘trip le b o tto m lin e ’ fram ew ork s to ‘quad ru p le b o tto m
lin e ’ th ink in g. In d eed , i f w e d istin g u ish b e tw e e n p o litic o -r e g u la to r y and
27 Ibid; G eof Kiel, ‘Designing Appropriate Corporate Governance Frameworks for Your Organisation’
(Paper presented at the IQPC Conference on Performance Measures for Corporate Governance, Sydney,
2 5 -2 6 February 2002); Mark M ills, ‘Evaluating Corporate Governance for Screened Investment’ (Paper
presented at the IQPC Conference on Performance Measures for Corporate Governance, Sydney, 2 5 -2 6
February 2002).
g o v er n a n ce c o n ce rn s as d istin ct in terests w o r th y o f in c lu sio n in ‘b o tto m lin e ’

th in k in g, w e start to m o v e tow ard s a m u lti-d im en sio n a l q u in tu p le b o tto m lin e.
O thers cou n ter that the real p o in t for b u sin e ss is to sh o w h o w ‘trip le b o tto m lin e ’
c o n ce rn s translate in term s w h ic h a ffe c t and relate d ir ectly to th e sin g le b o tto m
lin e , c o n c e iv e d la r g e ly in fin a n c ia l and e c o n o m ic term s.
T h is sy n ch ro n isa tio n o f g o v er n a n c e e lem en ts a lso h as an im p a ct o n th e
c o n c e p tio n o f corporate and b oard r e sp o n sib ilitie s. T o g o v er n a corp o ra tio n in a
w a y w h ic h p ro m o tes su sta in a b le corp orate v ia b ility an d v a lu e in r e sp o n se to th e
risk s, c h a lle n g e s, and o p p ortu n ities g en era ted b y fin a n c ia l co n ce rn s, p o litic o -
reg u la tory d y n a m ic s, s o c io e c o n o m ic factors and en v iro n m en ta l in terests is to
g o v er n in a w a y w h ic h fram es th o se r e sp o n sib ilitie s b e y o n d a sim p le d ic h o to m y
b e tw e e n sh areh old er and stak eh old er in terests. It resp o n d s to internal and
extern al org a n isa tio n a l p ressu res and d y n a m ic s w h ic h structure and in flu e n c e
corporate b eh aviou r. It ta k es th e a n a ly sis and p ra ctice o f g o v er n a n ce b e y o n d
arg u in g h o w and w h y c o m p a n ie s h a v e r e sp o n sib ilitie s to sh areh old ers,
sta k eh o ld ers and co m m u n ities.
S im ila rly , th e rela tio n sh ip s b e tw e e n th e d ifferen t fo rm s o f ca p ita l and b e tw e e n
sh areh old ers, ‘in n er c ir c le ’ stak eh old ers and ‘o u ter c ir c le ’ sta k eh o ld ers ca n fo rm
th e b a sis fo r altern ative fo rm u la tio n s o f corporate r e sp o n sib ility b e y o n d sim p le
sh a reh o ld er-sta k eh o ld er and con tractarian -com m u n itarian m o d e ls. F or ex a m p le,
M argaret B la ir and L yn n S tou t su g g e st a ‘team p ro d u ctio n a p p ro a ch ’ as an
altern a tive to ‘th e p r e v a ilin g p r in c ip a l-a g e n t m o d e l o f th e p u b lic corp o ra tio n and
th e sh areh old er w e a lth m a x im isa tio n g o a l that u n d er lie s i t ’ b e c a u se o f a
‘sh areh old er p rim a cy n o r m ’ d e e p ly em b e d d ed in corporate re g u la tio n and
th in k in g .28 U n d er th eir ap proach , th e ‘intern al g o v er n a n ce structure’ for
co rp o ration s r e lie s o n a ‘m ed ia tin g h iera rch y ’ w ith a b oard o f d irectors at its
a p ex , in w h ic h th e in terests and righ ts o f b o th sh areh o ld ers and n o n -sh a reh o ld ers
are m e d ia te d through th e corp oration as a sep arate le g a l e n tity rather than
e x e r c ise d d ir ectly b y th em .29 O n th is v ie w , corporate s u c c e ss as a c o lle c tiv e
en terp rise re sts on th e co m b in e d an d co o rd in a ted in v estm en t, in p u t and in terests
o f a te a m o f sh areh old ers and n on -sh a reh o ld ers su ch as e x e c u tiv e s , e m p lo y e e s,
cred itors and lo c a l c o m m u n ities in w h ic h corp ora tio n s d o b u sin e ss, ‘to p ro tect
th e e n te rp rise-sp ec ific in v e stm e n ts o f all th e m em b ers o f th e corporate
“tea m ” ’.30 A c c o r d in g ly , d irectors are in su la ted b y th e ‘m ed ia tin g h iera rch y ’
from d irect con trol b y sh areh old ers an d stak eh old ers, in stea d b e in g r e sp o n sib le
fo r th e ‘corp orate c o a litio n ’ o f in terests as th eir corp oration s ‘m e d ia te a m o n g the
c o m p e tin g in terests o f v a rio u s grou p s and in d iv id u a ls th at risk fir m -sp e c ific
in v e stm e n ts in a jo in t en terp rise’.31 M o r eo v er , p e o p le in v o lv e d in corp oration s
d o n o t sim p ly e x h ib it se lf-in te r e ste d b eh a v io u r e x c e p t as restrain ed b y extern al
sa n ctio n s, b u t rather are in flu e n c e d an d s o c ia lis e d in tern a lly ‘th rou gh so c ia l
fra m in g th at en co u ra g e s o ffic e r s, d irectors and sh a reh o ld ers to v ie w their
28 Margaret Blair and Lynn Stout, ‘A Team Production Theory o f Corporate Law’ (1999) 85 Virginia Law
Review 247, 249, 253.
29 Ibid 2 5 0 -2 .
30 Ibid 2 4 9 -5 0 .
31 Ibid 254, 3 2 1 -3 .
re la tio n sh ip s as c o o p e r a tiv e o n e s c a llin g fo r o th er-regard in g b e h a v io u r ’, thus

creatin g ‘in tern a lised trust an d tru stw o rth in ess ... e n co u ra g in g co o p er a tio n
w ith in fir m s’.32
C ritics o f th is a ltern ative ap proach p o in t to its d escr ip tiv e in a b ility to ex p la in
current corporate r e g u la tio n ’s p rim ary fo c u s o n th e sh a reh o ld er and to its
n o rm a tiv e in a b ility to p ro d u c e b etter d istrib u tio n a l o u tc o m e s fo r n o n
sh areh old ers. W h eth er v ie w e d in m ark et-b ased , co n tra ct-b a sed , rela tio n a l, or
te a m p ro d u ctio n term s, th e b o a rd ’s m e d ia tio n o f th e c o m p e tin g cla im s o f
sh areh old ers and n o n -sh a reh o ld ers to lim ite d corporate reso u r ces rests o n the
m erits o f th o se cla im s and th e b o a rd ’s w illin g n e s s to a c c o m m o d a te th em .33 O n a
critica l v ie w , th e te a m p ro d u ctio n ap proach ‘d o e s n o th in g to im p ro v e th e extra-
le g a l status o f n o n -sh a reh o ld ers in rela tio n to sh a reh o ld e rs’ and h e n c e ‘there is
n o re a so n to e x p e c t im p rovem en ts in d istrib u tio n a l o u tc o m e s ’.34 A c c o r d in g ly ,
th is a ltern ative ap proach ‘d o e s n o t ad v a n ce p r o g r e ssiv e effo rts to co n stru ct a
broader u n d erstan d in g o f m a n a g e m e n t’s r e sp o n sib ility to n o n -sh a reh o ld ers
a im ed at im p ro v in g d istrib u tion al o u tc o m e s cu rren tly a v a ila b le th rou gh m arket
in te r a c tio n s’.35
S u ch c r iticism s fram e sh areh old er and n o n -sh a reh o ld er in terests la rg ely in
o p p o sitio n a l term s, fo c u s e d m a in ly o n th e co m p e tin g d em a n d s fo r a llo c a tin g
sca r ce corp orate re so u rces. T h e y are co n tin g en t o n particu lar v ie w s o f
r e sp o n sib ility (e g , b oard r e sp o n sib ilitie s to oth ers), a c c o u n ta b ility (e g , so u rce s o f
corp orate a c c o u n ta b ility b e y o n d o w n er sh ip ), reg u la tio n (e g , th e le g a l status o f
n o n -sh a reh o ld er in tere sts) and m arket d y n a m ic s (e g , th e ex tra -leg a l fo r ce o f n o n
sh areh old er in terests). T h e v a lid ity o f su c h c r iticism s turns n o t o n ly o n the
a b se n c e o f m an d atory le g a l en h a n c em e n t o f n o n -sh a reh o ld er in terests r e la tiv e to
sh areh old er in terests, b u t a lso o n th e m in im a l im p a ct o f n o n -sh a reh o ld er
in terests o n b o th m arket d y n a m ic s and b oard d ec isio n -m a k in g in term s o f th e
im p o rta n ce and p o w e r o f n on -sh a reh o ld ers b e y o n d sim p ly th eir ca p a c ity to
bargain. It a lso rests o n a m in im a list v ie w o f th e in terd ep en d en ce o f sh areh old er
and sta k eh o ld er in terests, n o t le a st in term s o f th e a lig n m en t and sy n ch ro n isa tio n
o f g o v er n a n ce d im e n sio n s in corp orate r e sp o n se s to intern al an d ex tern a l risk s,
o p p o rtu n ities an d d y n a m ic s as o u tlin e d ab ove.
In th e g o v er n a n ce literature, corporate g o v er n a n ce is cle a r ly b e in g p e r c e iv e d
m o r e b road ly than in c o n v e n tio n a l th in k in g and p ra ctice in m a n y b u sin e ss and
g o v ern m en ta l o rg a n isa tio n s. F or exam p le:
corporate governance is more than simply the relationship between the firm and its
capital providers. Corporate governance also indicates how the various
constituencies that define the business enterprise serve, and are served by, the
corporation. Implicit and explicit relationships between the corporation and its
employees, creditors, suppliers, customers, host communities — and relationships
among these constituencies themselves — fall within the ambit of a relevant
32 Margaret Blair and Lynn Stout, ‘Trust, Trustworthiness, and the Behavioural Foundations o f Corporate
Law’ (2001) 149 University o f Pennsylvania Law Review 1735, 1735-6, 1799.
33 Millon, above n 17, 1038.
34 Ibid 1037.
35 Ibid 1005.
definition of corporate governance. As such, the phrase calls into scrutiny not only
the definition of the corporate form, but also its purposes and its accountability to
each of the relevant constituencies.3”
W h y m ig h t it b e n e c e ssa r y to b road en th e fo c u s o n corp orate and
o rg a n isa tio n a l g o v er n a n ce in th is and oth er w a y s? F irst, sh a reh o ld er in terests
h a v e a sy m b io tic rela tio n sh ip w ith oth er in terests, so attem p ts to
co m p a rtm en talise and straitjack et g o v er n a n ce w h o lly w ith in a particular k in d o f
sh a reh o ld er-b a sed v is io n is illu so ry , n o t le a st b e c a u s e a sh a reh o ld er-b a sed fo c u s
ca n still em b race and relate to oth er in terests. S e c o n d , w h a tev e r argu m ents m ig h t
b e m a d e ab ou t th e d iffer en t d e fin itio n s and d im e n sio n s o f g o v er n a n ce , th in gs
b e y o n d th e o rth o d o x n o tio n s o f strategy, p erfo rm a n ce, co n fo r m a n ce and
a c c o u n ta b ility (to sh areh old ers) risk b e in g m a r g in a lised u n le ss th e y are g iv e n
eq u a l p ro m in en ce and p riority as d istin ct d im e n sio n s o f g o v er n a n ce . T hird, th e
d im e n sio n s o f a cc o u n ta b ility to sh areh old ers an d sta k eh o ld ers are q u a lita tiv e ly
d iffer en t in th eir o w n righ t and in th eir a p p lica tio n to d iffer en t o rg a n isa tio n s in
th e p u b lic and p rivate secto rs. F ourth, for d irectors and th eir intern al and
ex tern al a d v ise rs, it is a lso im p era tiv e to en su re that le g a l risk m a n a g em en t and
c o m p lia n c e — im p ortan t as th e y are — do n ot b e c o m e th e ‘ta il’ w h ic h w a g s the
g o o d g o v er n a n ce ‘d o g ’. F ifth , g o v er n a n ce -ta lk m u st a cc o m m o d a te ch a n g e s in th e
em p h a sis, p riorities and featu res o f g o v er n a n ce th in k in g and p ra ctice to in c lu d e
m e a n in g fu l re fer en ce to n o tio n s lik e ‘trip le b o tto m lin e s ’, ‘b a la n ce d sc o r e c a r d s’
and ‘au d itin g fo r so c ia l o u tc o m e s ’ as w e ll as d ev e lo p m e n ts in sta k eh o ld er
a n a ly sis and reg u la to ry a cco u n ta b ility . F in a lly , th e sim ila rities and d iffe r e n c e s in
th e leg a l reg u la tio n o f g o v ern m en t corp oration s, n o n -g o v ern m e n t corp oration s
w h ic h se r v ic e g o v ern m en ts, n o n -g o v ern m e n t co rp o ra tio n s w h ic h se r v ic e
b u sin e ss and th e co m m u n ity , and c o o p er a tiv e v en tu res b e tw e e n g o v ern m en t
co rp o ration s an d n o n -g o v ern m e n t corp oration s a ll n e e d atten tio n o n d im en sio n s
o f g o v er n a n c e w h ic h are n o t lim ite d to c o n fo r m a n ce, c o m p lia n c e an d risk
m a n a g em en t, w h eth er u n d er th e Corporations Act 2001 (C th ), S ta te and
T erritory corp oratisation and b u sin e ss en terp rises le g isla tio n , g en era l la w s lik e
th e la w s o f trade p ra ctic es and con tract, or e v e n s p e c ific la w s lik e th e
Commonwealth Authorities and Companies Act 1997 (C th).
A ll o f th is a lso a ssu m e s that ‘b est p r a c tic e ’ g o v ern a n ce h as a d em o n stra b le
im p a ct o n corporate p erform an ce, in v e sto r p e r c ep tio n s and sta k eh o ld er
rea ctio n s. T h e e v id e n c e for th is is p a tc h y and is d ep en d en t o n so m e in -b u ilt
a ssu m p tio n s ab ou t th e rela tio n b e tw e e n th ese e le m e n ts.3637 F or ex a m p le, d o es
crea tin g su p erv iso ry b oard s and co m m itte e s, h a v in g m o re g e n u in e ly in d ep en d en t
d irectors, rotatin g audit firm s or partners for au dit and n o n -a u d it w o rk , or
m a n d a tin g corporate g o v er n a n ce co m m itte e s or c o d e s h a v e an a p p recia b le
im p a ct o n o v er a ll corporate p erform an ce? H o w e v e r , an y m ix e d e v id e n c e ab out
th e p r e c ise rela tio n b e tw e e n corporate g o v er n a n ce and corp orate p erfo rm a n ce
36 Bradley et al, above n 22, 11.

37 See Loizos Heracleous, ‘What is the Impact o f Corporate Governance on Organisational Performance?’
(2001) 9(3) Corporate Governance: An International Review 165; Sanjai Bhagat and Bernard Black,
‘The Non-Correlation between Board Independence and Long-Term Firm Performance’ (2002) 27
Journal o f Corporation Law 231.
m u st a lso a cc o u n t for th e im p lic a tio n s o f b ad g o v er n a n ce . It m ig h t b e clearer

after recen t corp orate c o lla p s e s that, ev e n i f g o o d corp orate g o v er n a n ce is n o
gu aran tee o f g o o d corporate p erform an ce, co rp o ra tio n s w h ic h fa il o fte n h a v e
in ad eq u ate corporate g o v er n a n ce o n so m e le v e l, w h ic h su g g e sts th at g o o d
g o v er n a n ce is a n e c e ssa r y b u t n o t su ffic ie n t co n d itio n fo r g o o d p erfo rm a n ce.
M o r eo v er , a c lo s e rela tio n sh ip e x is ts b e tw e e n corporate g o v er n a n ce and leg a l
d u ties and o b lig a tio n s.38 W h ile there is n o a b so lu te le g a l o b lig a tio n y e t in
A u stra lia to im p lem en t a p rescrib ed s y s te m o f corp orate g o v er n a n ce , apart from
rep ortin g w ith in regu latory g u id e lin e s o n w h a tev e r s y s te m o f g o v er n a n ce is in
p la c e , fa ilin g to h a v e g o o d corp orate g o v er n a n ce m ig h t lea d to a b rea ch o f the
d u ties o f care and d ilig e n c e and to oth er lia b ilitie s fo r corporate p e r so n n e l.39
A t a p ractical le v e l, o n e o f th e h ard est th in g s fo r e v e r y o n e fro m b oard s and
d irectors, at o n e le v e l, to m an agers and sta ff, at an oth er le v e l, is to relate th e
ex tern al and strategic en viro n m en ta l fa cto rs fo r an o rg a n isa tio n to its internal
o p era tio n s. F or m an y m id d le m an agers and sta ff, e v e n in th e m o st en lig h te n e d
o rg a n isa tio n s, th e d a y -to -d a y rea lity is m o st p r e ssin g ly c o n c e r n e d w ith
m an a g em en t d ir ectiv es, o rg a n isa tio n a l p ressu res, sta ffin g is s u e s , fin a n c ia l g o a ls,
c o s ts and b u d g ets, and p erso n a l issu e s o f p erfo rm a n ce, p a y and p ro m o tio n .
T h in g s lik e ‘b e st p r a c tic e ’ corporate g o v er n a n ce , corporate c itiz e n sh ip and
sta k eh o ld er in terests can se e m at le a st o n e step r e m o v e d from th e se ev ery d a y
co n cern s. T h e o n g o in g task fo r m o st org a n isa tio n s in b o th th e p u b lic and p riv a te
sec to rs is to c o n n e c t th e extern al factors to th e internal fa cto rs o n a ll o f th e
g o v er n a n ce le v e ls w h ic h m atter — o rg a n isa tio n a l and p erso n a l p erfo rm a n ce
m ea su res, strategic and fin a n c ia l p la n n in g , and so on . T h e se te n sio n s are
illu strated in D ia g ra m 1.40
IV IMPLICATIONS FOR CORPORATE REGULATION AND

DIRECTORS’ DUTIES
O n e o f th e n a g g in g is s u e s in corp orate reg u la tio n c o n ce rn s th e ex ten t to w h ic h

d ir e c to r s’ d u ties e x te n d b e y o n d d u ties o w e d to th e co m p a n y and its sh areh old ers.
T h e standard co m m er cia l m antra that th e b u sin e ss o f co rp o ra tio n s and their
d irectors is to m a x im ise p ro fits, sto c k v a lu e s, fin a n c ia l sh areh old er returns and
en su re b u sin e ss su sta in a b ility (b e c a u se o f th eir p rim ary o b lig a tio n to a ct in the
b e st in terests o f th e corp oration and its sh areh o ld ers, rather than to m e e t w id e r
c o m m u n ity in terests) m ig h t w e ll b e right. H o w e v e r , it fra m es th e is s u e in a
particu lar w a y and is co n tin g en t u p o n th e truth or fa lsity o f so m e d eep er
a ssu m p tio n s ab ou t th e p rop er rela tio n sh ip b e tw e e n corp oration s and their
c o m m u n ities. U n fo rtu n a tely , p u b lic d eb a te o n th is is s u e is u su a lly d o m in a ted b y
sta k eh o ld er p o stu rin g and sp in at th e le v e l o f m antras ab ou t ‘corporate b e st
38 See Cole, above n 26; Knott, above n 21.

39 See Cole, above n 26.
40 See Diagram 1 at the end o f this article.
in te r e sts’ an d sh a reh o ld er/sta k eh o ld er a cc o u n ta b ility rather than a n a ly sis at an y

d eep er or w id e r le v e l.
T h e c o n v e n tio n a l v ie w is that, w h er e v e r there is a c o n flic t b e tw e e n
p r o fita b ility and w id e r co n ce rn s lik e corporate c itiz e n sh ip , a d irector lo o k in g at
th e current la w w o u ld sa y , ‘I h a v e to act in th e b e st in terests o f th e c o m p a n y and
I c a n ’t sa c r ific e p ro fita b ility and fin a n c ia l return fo r th e se o th er th in g s ’. Is th e
la w o n corp orate o b lig a tio n s r e a lly as ‘z e r o -su m ’ as that c o m m en t su g g e sts? Is it
p o s s ib le that co n sid e ra tio n s o f corp orate citiz e n sh ip m ig h t c o n d itio n d ir e c to r s’
d u ties or th eir b u sin e ss ju d g m en ts in a w a y w h ic h w o u ld le g a lly a llo w
sta k eh old er and w id er co m m u n ity in terests to b e fa cto red in to th e c a lc u la tio n o f
corporate and sh areh old er b e st in terests b y d irecto rs as part o f th eir le g a lly
en fo r c e a b le d u ties? T hat d irect lin k a g e n o w s e e m s u n lik e ly in A u stra lia , e x c e p t
b y le g is la tiv e am en d m en t. In Spies v R,41 th e H ig h C ourt re jec ted p rev io u s
ju d ic ia l in tim a tio n s that, in a d d itio n to th eir d u ties to th e co m p a n y , d irectors
m ig h t o w e in d ep en d en t d u ties d irectly to and en fo r c e a b le b y e x is tin g or p o ten tia l
cred itors. T h e H ig h C ourt c ite d and im p lic itly a c c e p te d J u stice G u m m o w ’s
ex p la n a tio n in Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler42 that
th e ‘d u ty ’ o f d irectors to c o n sid e r th e in terests o f cred ito rs in situ a tio n s o f
in s o lv e n c y or near in s o lv e n c y ‘is m e r e ly a restrictio n o n th e righ t o f sh areh old ers
to ra tify b rea c h e s o f th e d u ty o w e d to th e c o m p a n y ’.43
S a y in g that d irectors o w e n o d irect d u ty b e y o n d th e co m p a n y and its
sh areh old ers to cred itors certa in ly p rec lu d es that th e y m ig h t o w e th is d irect d uty
to n o n -cred itors. H o w e v e r , it is n o t th e sa m e as sa y in g that d irectors are
p r e c lu d ed b y th eir d u ties from fa c to rin g th e in terests o f cred itors and n o n
cred ito rs in to th eir d e c isio n -m a k in g in so m e w a y . N o r d o e s it se ttle w h eth er su ch
a sse ssm e n ts can ev e r form part o f an a sse ssm e n t o f w h a t is in th e b e s t in terests
o f th e corp oration and its sh areh old ers u nd er th e current la w . N o r d o es it settle
w h a t reform o f the la w sh o u ld im p o se u p o n co rp o ra tio n s and th eir o ffic e r s as
w id e r d u ties, i f any.
T here are critical regu latory, m a n a g em en t an d ju risp ru d en tia l is s u e s here.
W h y w o u ld an y d irector, m an ager, or a d v ise r w h o s e rem u neration or
p erfo rm a n ce is a s s e s s e d a cc o rd in g to sh ort-term tim e lin e s and fin a n c ia l
m ea su r es a lo n e h a v e an y in c e n tiv e b e y o n d so c ia l a ltru ism or career su ic id e to
p a y an y m e a n in g fu l co n sid e ra tio n to m ed iu m -term s o c ia l c o n se q u e n c e s an d n o n -
fin a n c ia l m e a su r es lik e s o c ia l au dits and eth ica l in v e stm e n t p r in c ip les? T o u se
a c c o u n tin g ja r g o n , w h a t is th e in c e n tiv e h ere fo r th e corp o ra tio n g e n e r a lly or the
corporate a g en t in particu lar to in tern a lise th e ex tern a l c o sts o f a co u rse o f
actio n ? H o w d o y o u in stitu tio n a lise and o p era tio n a lise w id e r co m m u n ity
in terests an d h um an righ ts co n ce rn s in corporate d e c isio n -m a k in g ? T h ere is
m u ch to b e sa id for reg u la tio n w h ic h re fle c ts th e rea lity o f transn ation al
o p era tion s o f m u ltin a tio n a l corp oration s and th eir p o ten tia l fo r b rea ch es o f
h um an righ ts and so cio -e n v ir o n m e n ta l standards, an d w h ic h a lso strik es at h ig h
41 (200 0 )2 0 1 CLR 603.

42 (1 99 4 )5 1 FCR 420, 444.
43 Spies v R (2000) 201 CLR 603, 636.
p o in ts o f b o th in stitu tio n a l le v e r a g e (e g , im p o sitio n o f corporate rep o rtin g and

d isc lo su r e o b lig a tio n s) and p erso n a l le v e r a g e (e g , im p o sitio n o f p erso n a l
lia b ility ) in corp oration s.44 I f there sh o u ld b e corporate refo rm to en h a n ce th e
c o n n e c tio n b e tw e e n corp orate o b lig a tio n s and so c ia l re sp o n sib ility , sh o u ld that
r e ly o n ch a n g es in g o v ern m en t p o lic y (e g , in c lu d in g s o c ia l au d its and oth er n o n -
fm a n c ia l m ea su res in criteria for aw ard in g g o v ern m en t ten d ers), se lf-r e g u la tio n
(e g , in d u stry standards and c o d e s ), or le g isla tio n (e g , th e C orporate C o d e o f
C o n d u ct B ill 2 0 0 0 [2 0 0 2 ] (C th ))?
A n A u stra lia n -b a sed partner in U n ite d S ta tes la w firm S k ad d en A rp s S la te
M e a g h e r & F lo m , R ob ert H in k le y , su g g e ste d in A p ril 2 0 0 0 that fiv e b a sic
o b lig a tio n s o f citiz e n sh ip sh o u ld b e in c lu d e d in a m en d m en ts to th e d u ties o f
d irectors u nd er corp orate la w , so that th eir p rim ary p ro fit-m a k in g en terp rise for
sh areh old ers w o u ld n o t b e ‘at th e e x p e n se o f th e en v iro n m en t, h um an righ ts, th e
p u b lic sa fe ty , th e c o m m u n ities in w h ic h th e co rp oration c o n d u c ts its op era tio n s
or th e d ig n ity o f its e m p lo y e e s ’ 45 H is ration ale fo r th is su g g e stio n c o m b in e s th e
b u sin e ss o rien tation o f a c o m m er cia l la w y e r w ith a re a listic ap praisal o f
reg u latory, b u sin e s s and in d iv id u a l d yn am ics:
Corporations ... exist only because laws have been enacted that provide for their
creation and give them a licence to operate. ...
... The corporate law establishes rules for the structure and operation of
corporations. The keystone of this structure is the duty of directors to preserve and
enhance shareholder value — to make money. Under this structure, the objective of
stockholders — making money — becomes the duty of directors which, in turn,
becomes the marching orders for the corporation’s officers, managers and other
employees. ... Most corporate decisions are made by people who have little
incentive to promote corporate citizenship or social responsibility (which in some
measure requires corporate sacrifice) unless such promotion also can be shown to
improve profitability ... Nothing in the system encourages (let alone requires)
corporations to be socially responsible or to contribute, cooperate or sacrifice for
the benefit of the community or the common good (that is, be a good citizen).
... The duty of directors to make money drives all corporate actions. This makes it
the point of highest leverage. Corporations will take on the obligations of
citizenship only when the duty to make money becomes balanced by something that
simulates the human conscience. ... It is time to amend corporate law to encourage
corporations to be good citizens as well as make money.46
W h a tev e r a n y o n e th in k s ab ou t w h eth er co rp o ra tio n s sh o u ld b e le g a lly
c o m p e lle d to m e e t w id e r s o c ia l o b lig a tio n s, P r o fesso r B o b B a x t is c le a r ly correct
in th is assessm en t:
Many people believe directors of large corporations, including banks, insurance
companies, telecommunications companies etc, should have regard to a broader set
of community obligations. However, if that is the way society wants to regulate such
companies (I do not agree this is the best way of dealing with the problems that may
face the community, but it is an option that is favoured by some), then legislation
governing the duties of the directors of such companies should be clarified.
44 On these notions o f leverage, see Robert Hinkley, ‘The Profit M otive Can Work With a Moral M otive’,
Australian Financial Review (Sydney), 7 April 2000, 33, extracted from his chapter in Human Rights,
Corporate Responsibility: A Dialogue (2000).
45 Ibid.
46 Ibid 3 2 -3 .
. . . I f d ir e c t o r s a r e e x p e c t e d t o r u n t h e a c t iv i t i e s o f t h e ir c o m p a n i e s w i t h th e in t e r e s t s
o f th e c o m m u n i t y a t t h e f o r e f r o n t o f th e ir o b l i g a t io n s , t h e n t h e y m u s t h a v e a d e q u a te
p r o t e c t i o n in t h e l a w ( a n d f r o m t h e c o u r t s ) , th a t s h o u l d s h a r e h o ld e r s f e e l t h e y are
n o t r e c e i v i n g t h e s a m e l e v e l o f d i v i d e n d s t h e y h a d b e e n a c c u s t o m e d t o , th e d ir e c t o r s
w i l l n o t b e in b r e a c h o f t h o s e d u t ie s .47
In short, if we are serious about institutionalising wider community interests
within corporate decision-making, we need to recognise a few things. There is
not necessarily a zero-sum correlation between shareholder interests and wider
community interests, such that one inevitably detracts from the other. It is
unacceptable to leave the law in a state where such assessments might or might
not be implicit within directors’ duties and business judgment defences. In other
words, as Baxt argues, directors’ legal obligations should be legislated clearly
one way or the other. Chanting the mantra of ‘what is in the best interests of
corporations and their shareholders’ simply begs the question of what is in their
best interests. What does this mean, for example, in the context of directors of
government business enterprises who must act in the best interests of their
corporations and shareholders but whose shareholders are shareholding ministers
who represent wider community interests? Moreover, the interests of
shareholders are significantly but not exclusively financial, leading to deeper
problems in institutionalising both financial and social measures in decision
making, as part of the exercise of internalising within the corporation the
external costs of corporate action for the wider community. Society cannot
legislate one way or the other on the content of directors’ duties without first
settling the extent to which corporations must not only comply with legal
regulation in a minimalist sense but should also meet social obligations because
of society’s creation of market and economic conditions for their flourishing (ie,
the ‘quid pro quo’ argument). As Hinkley indicates, directors’ and officers’ legal
obligations are probably the highest point of leverage for implementing change
of this kind.
Much corporate and regulatory thinking is predominantly locked in a zero-
sum conflict between shareholder and stakeholder theories of corporate
responsibility, on one hand, and contractarian and communitarian theories, on
the other. According to the ‘quid pro quo’ argument, corporations operate in
communities. They receive the benefit of tax concessions and incentives from
governments. They receive the benefit of market regulation. Consequently, on
one view, there is a price to pay for the status and privilege of corporate
existence, and the quid pro quo for this is that corporations and directors cannot
make financial decisions in a social vacuum. According to ‘triple bottom line’
thinking, corporations should focus holistically on the economic, social and
environmental dimensions and implications of their business and not simply on
the ‘single bottom line’ of financial considerations, profits, business costs, and
share values and dividends. Yet that alternative conception also assumes much
about how we should view and regulate corporations.
47 Bob Baxt, ‘Avoiding the R ising Floods o f Criticism: D o Directors o f Certain Companies Owe a Duty to
the Community?’ (2000) 16(11) Company Director 42.
Of course, there are many complexities here as well as theoretical tensions

between what Professor Stephen Bottomley has described as the alternative
concession-based, contract-based and constitutional views of corporations in
society.48 Bottomley proposes a middle ground, advocating a theory of
‘corporate constitutionalism’ in which ‘a corporation is an institution which, via
its constitution, mediates public and private interests and values’, so that
‘corporate regulation should be based on both state and corporate inputs’. This
view denies the absolutism of the ‘corporations exist solely to maximise
shareholder value’ school and the ‘corporations have an absolute obligation to
the communities which confer status, privilege and benefits on them’ school.49
As he explains:
T h e t h e o r y o f c o r p o r a te c o n s t i t u t i o n a l i s m b e g i n s w i t h th e p r o p o s it i o n th a t
c o r p o r a t io n s a r e m o r e t h a n j u s t a r t if i c i a l ly c r e a t e d l e g a l in s t it u t io n s (c o n tr a r y t o th e
s u g g e s t io n s o f c o n c e s s i o n t h e o r y ) a n d t h e y a r e m o r e th a n j u s t e c o n o m i c in s t it u t io n s
( c o n t r a ^ t o t h e a r g u m e n t o f c o n t r a c t - b a s e d t h e o r ie s ) . C o r p o r a t io n s h a v e b o t h o f
t h e s e d i m e n s i o n s , b u t t h e y a r e a l s o s o c i a l e n t e r p r is e s a n d t h e y a r e p o l i t i e s in t h e ir
o w n r ig h t. B e g i n n i n g w i t h t h is p r o p o s it i o n , c o r p o r a te c o n s t i t u t i o n a l i s m a r g u e s th a t
th e m e a n s b y w h ic h c o r p o r a t io n s a r e g o v e r n e d a n d b y w h ic h t h e y g o v e r n s h o u l d b e
c o n s t it u t e d b y s ta te a n d c o r p o r a t e in p u t s .50
So, rather than viewing corporations simplistically and one-dimensionally as
being pro-profits (often at the expense of the community) or alternatively pro
citizenship (even at the expense of shareholder returns), this more complex
dualist view offers a more sophisticated perspective which is arguably closer to
corporate and socioeconomic reality. Of course, it is simply a starting point for
reframing corporate thinking, regulation and practice.
V BU SINESS E TH IC S, CO RPO R A TE C IT IZ EN SH IP AN D THE

D IFFER ENT FO RM S O F CAPITAL
Can anybody nominate one director or business professional who, in their

public statements, is not in favour of business ethics, good corporate governance,
corporate citizenship, respect for human rights and corporate contributions to the
fabric of society? I doubt it. Those things are part of the public rhetoric and often
the private concerns of people in business. What we are really talking about here
is the problem which arises through ineffective models of thinking when it
comes to so-called ‘real life’ commercial decision-making.
Indeed, while the dynamics of corporations and the market need separate
consideration from the perspective of business ethics on institutional and
structural levels, too often the relevance of business ethics or even corporate
citizenship is difficult to grasp on a personal level. Mention something like
‘corporate citizenship’ to many corporate lawyers and they will metaphorically
roll their eyes before shrugging their shoulders at the idea that such notions can
offer meaningful practical guidance at the necessary level of detail for directors
48 Bottomley, ‘The Birds, the Beasts, and the Bat’, above n 18.
49 Ibid 257, 262.
50 Ibid 255.
about fulfilling their statutory directors’ duties under the Corporations Act 2001
(Cth). Mention the notion of the ‘triple bottom line’ to boards and managers who
act in line management positions and they will collectively shrug their shoulders
at the idea that this has too much connection with the real and everyday ‘bottom
line’ of corporate profitability, institutional and personal performance and
financial shareholder returns. This marginalisation, compartmentalisation and
de-intellectualisation of corporate decision-making is too often defended on the
anti-theoretical basis that contrary calls to incorporate wider interests are
rhetorical at best and either commercially naive or quaintly academic at worst.
The narrowness of mindsets which can occur in calculations of corporate
interests is not always somebody’s fault. Indeed, as Andrew Stark once
remarked:
I s u s p e c t th a t t h e f i e l d o f b u s i n e s s e t h i c s is la r g e ly ir r e le v a n t f o r m o s t m a n a g e r s . I t ’s
n o t th a t m a n a g e r s d i s l i k e t h e i d e a o f d o i n g t h e r ig h t t h in g ... b u t r e a l- w o r ld
c o m p e t i t i v e a n d in s t it u t io n a l p r e s s u r e s l e a d e v e n w e l l - i n t e n t i o n e d m a n a g e r s
a s tr a y .51
Nor should the introduction of higher-level ethical and governance concerns
necessarily complicate what is otherwise supposed to be a straightforward
exercise of acting in a company’s best interests by acting in the best interests of
its shareholders. As ethicist Simon Longstaff asks:
H o w m a n y b o a r d s h a v e a f o r m a l p r o c e s s r e q u ir in g s e n i o r m a n a g e m e n t t o c o n s id e r
a n d r e p o r t o n t h e e t h i c a l i m p l ic a t i o n s o f p r o p o s a ls in c lu d e d i n b o a r d p a p e r s ? H o w
m a n y d ir e c t o r s c a n n a m e th e c o r e v a l u e s a n d p r i n c ip le s o f c o m p a n i e s t h e y g o v e r n ,
a n d a g r e e t o a b id e b y t h e m w h e n m a k in g d e c is io n s ? . . . T h e tr u th is th a t l i f e d o e s
n o t b e c o m e m o r e c o m p l ic a t e d b e c a u s e o f e t h ic a l r e f l e c t i o n . E t h ic s r e v e a ls th e
c o m p l ic a t i o n th a t i s a lr e a d y th e r e a n d th a t la r g e l y g o e s u n n o t i c e d — u n t il it i s to o .
la te . I m a g in e h o w m u c h b e t t e r l i f e w o u l d b e i f t h e r e h a d b e e n e v e n a lit t le m o r e
e t h ic a l r e f l e c t i o n i n t h e b o a r d r o o m s o f H I H , O n e .T e l, A r th u r A n d e r s e n , E n r o n ,
W o r ld C o m .52
Unthinkingly adopting a non-holistic form of economic analysis as the default
framework for corporate regulation and assuming the value-neutrality of market
forces serves to reinforce some interests at the expense of others, and also
straitjackets our thinking in ways which might not reflect a deeper reality. As
Professor Max Charlesworth wrote about business and markets in the early
1990s, in terms which still resonate in the era of Enron and CLERP 9:
I n t h e a r e a o f b u s i n e s s a n d c o m m e r c e , w h i l e th e r e is a g r o w i n g a w a r e n e s s o f t h e
im p o r t a n c e o f e t h i c s , th e m y t h th a t b u s i n e s s i s b u s i n e s s a n d th a t i t i s a n in h e r e n t ly
s e l f - r e g u l a t in g m a c h in e , a n d a s a m o r a l a s a n y o t h e r m e c h a n i c a l s y s t e m , r e ta in s a
g r e a t d e a l o f it s f o r c e . . . .
T h e c e n t r a l m y t h i n t h e s u b - c u lt u r e o f b u s i n e s s i s , o f c o u r s e , ‘t h e m a r k e t ’. T h e
n o t i o n o f th e m a r k e t i s c o n c e i v e d in m e c h a n i s t i c te r m s: th e m a r k e t i s s e lf - r e g u l a t in g
a n d e t h ic a l c o n s i d e r a t io n s a r e a s ir r e le v a n t t o it s f u n c t io n in g a s t h e y a r e t o a n y o th e r
m e c h a n i c a l s y s t e m s u c h a s a w a t c h o r a m o t o r c a r. A t th e s a m e t im e th e r e i s a h a p p y
c o i n c i d e n c e b e t w e e n th e o p e r a t io n s o f t h e m a r k e t a n d g e n e r a l h a p p i n e s s . . . I f o n e
t a k e s a n a n t h r o p o lo g ic a l a p p r o a c h t o th e s u b - c u lt u r e o f b u s i n e s s , o n e s e e s th a t ‘t h e
51 Andrew Stark, ‘What’s the Matter with Business Ethics?’ (1993) 71(3) Harvard Business Review 38,
quoted in ‘On the Job’ (1993) 26(5) Psychology Today 20, 21.
52 Simon Longstaff, ‘Excess Baggage’, The Bulletin (Sydney), 3 September 2002, 52.
m a r k e t ’ is a n id e a li s a t i o n , a c o n c e p t a b s t r a c t e d f r o m a c o m p l e x t i s s u e o f s o c i a l a n d
c u ltu r a l a n d l e g a l a n d o th e r f a c to r s w i t h o u t w h ic h it w o u ld h a v e n o m e a n in g .
T h e m a r k e t o p e r a t e s w i t h in s o m e k in d o f s ta te w e l f a r e o r s e r v i c e s y s t e m : th a t is
w h e r e t h e s t a t e i s e x p e c t e d t o p r o v i d e s o m e d e g r e e o f b a s i c s e r v ic e s , o r ‘p u b lic
g o o d s ’, s u c h a s h e a lt h , e d u c a t io n , l a w a n d o r d e r , p o l i c e , e t c , a n d s o m e k in d o f
‘ s a f e t y n e t ’ s e r v ic e s f o r t h e p o o r , th e u n e m p lo y e d , t h e a g e d , t h e d i s a b l e d , t h e i ll , e t c .
P e o p l e m a y d if f e r o v e r th e a m o u n t o r d e g r e e o f th e s e r v i c e s a n d w e l f a r e th e s t a t e is
e x p e c t e d t o p r o v i d e , b u t n o o n e i n a n y a d v a n c e d in d u s t r ia l s o c i e t y s e r io u s l y
q u e s t io n s th a t th e r e s h o u l d b e s o m e s u c h s e r v i c e s . . . W h a t w e h a v e i n r e a lit y t h e n is
a s ta te s u b s id is e d a n d s ta te s u p p o r t e d a n d r e g u la t e d m a r k e t e c o n o m y . T h e v e r y
e x i s t e n c e o f t h e m a r k e t d e p e n d s , i n f a c t, u p o n c o n t in u a l s ta te in t e r v e n t io n .
. . . W h i l e t h e r e i s a p l a c e f o r t h e k in d o f b u s i n e s s e t h i c s th a t d e a l w it h c o n c r e t e
a s p e c t s o f b u s i n e s s p r a c t ic e — tru th in a d v e r t is in g , fa ir t r a d in g , d u t ie s t o
s h a r e h o ld e r s , o b l i g a t io n s to th e e n v ir o n m e n t — th e r e i s a l s o a n e e d f o r a m o r e
b r o a d l y c o n c e i v e d b u s i n e s s e t h i c s w h ic h r e f l e c t u p o n th e b u s i n e s s s y s t e m i t s e l f a n d
u p o n th e b r o a d e r s o c i a l a n d c u ltu r a l a n d l e g a l c o n t e x t s w it h in w h i c h b u s i n e s s
o p e r a t e s a n d f r o m w h ic h it d e r iv e s it s m e a n i n g ? 3
Here, the supposed neutrality of the market, enshrined in the common

assumptions of ‘competitive neutrality’ and ‘level playing fields’, is exposed in
the ways outlined by Professor Charlesworth and in other ways too. Many
corporate and business organisations benefit from non-neutral features of the
market and the regulatory environment such as subsidies, incentives and
regulatory advantages. The market itself is responsive to public interests and
expectations as well as shifts in consumer goodwill. The market both shapes and
reflects the different dimensions of capital represented in the ideas of economic
capital, social capital, human capital and political capital. It consists of
interdependent relationships between governments, regulators, companies,
shareholders, stakeholders and communities as market participants.
Professor Razeen Sappideen crystallises the competing theories of corporate
responsibility and its social and regulatory dimensions as follows:
T h e r e h a s b e e n o n g o i n g d i s c u s s i o n c o n c e r n i n g t h e r o le o f m a r k e ts , g o v e r n m e n ta l
r e g u la t io n , a n d b u s i n e s s e t h ic s . A t o n e e n d o f t h e s p e c t r u m i s t h e v i e w o f n e o
c la s s i c a l e c o n o m is t s , e p i t o m is e d in M il t o n F r ie d m a n 's f a m o u s s ta t e m e n t th a t t h e
s o l e r e s p o n s ib i li t y o f b u s i n e s s i s t o m a x i m is e it s p r o f it s s u b j e c t t o t h e c o n s t r a in t s o f
t h e la w . A t th e o th e r e n d i s th e M a r x is t v i e w o f S ta te o w n e r s h ip o f th e m e a n s o f
p r o d u c t io n . I n b e t w e e n a r e v a r io u s s h a d e s o f w h a t i s k n o w n a s th e s t a k e h o ld e r v i e w ,
w h i c h s e e s t h e r o le o f b u s i n e s s ( a n d in t h is c o n t e x t , th e r o le o f th e la r g e
c o r p o r a t io n ) a s s e r v in g t h e n e e d s o f s o c i e t y a n d a s d e r iv i n g it s l e g i t i m a c y f r o m th e
s e r v in g o f s u c h n e e d s . T h e la tte r v i e w g e n e r a l l y r e c o g n i s e s th a t c o r p o r a t io n s o w e
o b l i g a t io n s n o t o n l y t o s h a r e h o ld e r s , b u t a ls o t o o t h e r c o n s t i t u e n c i e s s u c h a s
e m p l o y e e s , m a n a g e r s , a n d c o n s u m e r s a n d , in c e r t a in s it u a t io n s , to th e g e n e r a l
p u b lic . M o r e r e c e n t ly , t h e n e e d f o r e t h i c s in b u s i n e s s h a s a g a in b e c o m e a k e y t o p i c
f o r d i s c u s s i o n . E t h ic a l b u s i n e s s p r a c t ic e r e q u ir e s th a t c o r p o r a t e m a n a g e m e n t
o b s e r v e m o r e th a n t h e d ic t a t e s o f t h e la w , o r th e s i g n a l s o f th e m a r k e tp la c e , a n d d o
th a t w h ic h is p r e f e r a b ly b o t h r ig h t a n d b e n e f i c i a l t o s o c i e t y .5354
Professor Sappideen ‘focuses on the interdependence of business ethics,
economics and law at the point of their interface’, highlighting ‘the presence of a
53 M ax Charlesworth, ‘Ethical Reflection and Business Practice’ in Tony Coady and Charles Sampford
(eds), Business, Ethics and the Law (1993) 191, 191-203.
54 Razeen Sappideen, ‘Economics, Law and Business Ethics: Some R eflections’ (1997) 25 Australian
Business Law Review 422.
symbiotic relationship between these three strands, strategically interwoven,

where each is dependent on the other for its sphere of operation’.55 Again, the
idea of interdependent interests is critical. Many ‘single bottom line’ proponents
under-emphasise the interdependence, for example, between corporate,
shareholder, stakeholder and community interests, while many ‘triple bottom
line’ advocates overemphasise the symbiotic connection between social,
economic and environmental concerns for business.
So, is the relationship between corporate benefit and community benefit not
really linear but rather, continuous and cyclical? If Eva Cox is right, social
capital and human capital are not only as important as financial capital, but
social well-being is a precondition for financial capital and economic prosperity
to flourish.56 Similarly, is profitability an outcome of corporate performance
which is predicated on corporate responses to regulatory, economic, social and
environmental dynamics rather than a business pursuit in its own right? Global
and social trends and conditions affect the conditions for financial profitability
in integral rather than marginal ways. Financial profitability requires the right
community conditions, regulatory environment, politico-legal system and
economic climate. Shareholders demand financial viability and profitability, and
citizens expect economic prosperity to flow though to social benefits.
Shareholders are not just shareholders but investors, consumers and members of
families and communities. Informed shareholders are unlikely to accept that
ethical and community concerns are always marginal or outweighed by
economic considerations, that framing economic and non-economic
considerations as competitive rather than complementary considerations is
always appropriate, or that calculations of shareholder interests in purely
financial terms fully captures the multi-layered notions of ‘the best interests of
the corporation’ and ‘the best interests of the shareholders’. This
interconnectedness means that saying that ‘good business ethics and good
corporate citizenship are simply good business’, which simply treats these things
as means to a business end rather than worthwhile for their own sake and
relevant to that business end, is too reductionist in its thinking.
Politicians, business associations and community groups variously promote
the idea that ‘no corporation is an island’, whether that idea is framed in terms of
Prime Minister John Howard’s notion of a ‘social coalition’ or whether that idea
lives in the minds of ‘[corporate leaders who are becoming more aware of
international business moves to promote a ‘civil society’ — ensuring human
rights and environmental protection’.57 Sustained shareholder value is harmed by
anything which hampers the corporation’s public reputation, business reputation,
consumer goodwill, community support or capacity to influence public affairs.
That harm to shareholder investments is not clearly avoided by
compartmentalised calculations of corporate profitability and financial returns to
shareholders which ignore or marginalise these interconnected concerns. In turn,
55 Ibid.
56 Eva Cox, A Truly Civil Society (1995).
57 Louise Dodson, ‘B ig Business Profits from Caring’, Australian Financial Review (Sydney), 12 May
2000, 53.
this damage to a corporation’s political capital, public capital and consumer

capital flows through to the corporation’s financial capital and reduces the
corporation’s collective will, capacity and resources for contributing to the
community in ways beyond supply of its products and services. And so the cycle
continues.
None of this denies or undervalues the importance and complexity of
corporate and shareholder calculations of their best interests. None of it denies
the need to demonstrate how and why the interests of non-shareholders count.
None of it makes simple the task of recognising and then weighing the economic
and non-economic considerations which relate to corporate interests in
combination with profitability, dividends and financial returns. None of it
suggests that directors, corporate officers and shareholders will be easily
persuaded that their corporation should devote resources and personnel to
matters beyond the minimum legal and regulatory necessities and at considerable
expense, unless that is related to economically relevant consequences for the
corporation in the short or long term. None of it means that directors and
shareholders are faced only with a choice to forego tangible profits for the sake
of intangible social benefits.58 It might mean that some corporate and shareholder
conceptions of the components of the corporation’s best interests need reframing
and even broadening.
VI SH A R E H O L D E R S v ST A K EH O LD ER S
C o r p o r a te A u s t r a lia h a s f a i le d t o d e f e n d i t s e l f a g a in s t th e a s s a u lt b y th e s ta k e h o ld e r
lo b b y . . . . D u r in g th e p a s t d e c a d e , t h e c o r p o r a t io n , p a r t ic u la r ly t h e A n g lo - A m e r ic a n
v a r ie t y , h a s b e e n s u b j e c t e d t o a s u s t a in e d a tta c k b y t h e s t a k e h o ld e r lo b b y . T h is
m o v e m e n t ’s a im i s n o t t o d e s t r o y c o r p o r a t io n s b u t t o r e g u la t e a n d g u i d e t h e m a w a y
f r o m th e w i s h e s o f s h a r e h o ld e r s . T h is m o v e m e n t a c t s n o t t h r o u g h th e m a r k e tp la c e
o r n e c e s s a r i l y t h r o u g h th e f o r m a l r e g u la t o r y p r o c e s s , b u t t h r o u g h p u b l i c o p in io n .
T h e m o v e m e n t v i g o r o u s l y p r o m o t e s a v i s i o n o f s y s t e m i c c o r p o r a t e f a ilu r e — o n
a c c o u n t a b ilit y , g o v e r n a n c e , p e r f o r m a n c e , c o n t r ib u t io n t o s o c i e t y , tr e a tm e n t o f
w o r k e r s a n d im p a c t s o n th e e n v ir o n m e n t .
—Mike Nahan, Executive Director of the Institute of Public Affairs.59
A s a p o s s i b l e o u t c o m e o f r e s p e c t i n g p r o p e r t y r ig h t s a n d y e t b e i n g c o n c e r n e d a b o u t
e c o n o m i c j u s t i c e , o n e m ig h t c o n s i d e r t h e tr e a tm e n t o f w o r k e r s a s a m o r a l i s s u e a n d
th u s r e f u s e t o i n v e s t in a c o m p a n y o r b u y i t s p r o d u c t s . T h e s a m e c a n b e d o n e in
r e s p o n s e t o e n v ir o n m e n t a l c o n c e r n s a n d o t h e r s o c i a l i s s u e s . I n t h is w a y , th e s o c i a l
v a l u e th a t is u p h e ld p r o v i d e s a m a r k e t i n c e n t iv e f o r c o r p o r a t io n s t o a c t r e s p o n s ib l y .
I w o u l d a r g u e th a t th is is a m u c h m o r e e t h i c a l w a y o f a p p l y in g s o c i a l p r e s s u r e t o a n
i r r e s p o n s ib le c o m p a n y th a n m a n d a t in g b y l a w th a t t h e y c o m p l y w i t h c e r ta in
r e g u la t io n s . G r a n te d , th e fe a r th a t t h e c o n s u m e r w o n ’t r e s p o n d t o t h e s e a b u s e s is
58 For example, corporations committed to business ethics and community benefits might institutionalise
these concerns by including their assessment in corporate performance reviews, strategic and budgetary
planning, audit criteria and assessments, task forces on illegal and unacceptable internal and industry
practices, staff awareness and discussion sessions, and monitoring o f newsworthy industry and
community concerns and developments: see Charlesworth, above n 53, 205. See also the table o f actions
in Diagram 2 at the end o f this article.
59 ‘Stand Up For Capitalism’, The Australian (Sydney), 4 April 2001, 13.
w a r r a n te d . H o w e v e r , p e o p l e a r e r a r e ly a w a r e o f h o w r e g u la t io n s th a t a r e in t e n d e d to
c o m p e n s a t e fo r i n d iv id u a l v ir t u e , i n e f f e c t , w o r s e n t h e e c o n o m y , c o n t r ib u t e to th e
c a u s e s o f c o r r u p tio n , a n d d o lit t l e t o f o s t e r t h e s o c i a l v ir t u e s th a t a r e n e c e s s a r y f o r a
j u s t s o c i a l o r d e r.
—Reverend Robert Sirico.60
Much of this discussion occurs within an ideological map which positions

contractarian shareholder-focused corporate models, at one extreme, and
communitarian stakeholder-focused corporate models, at the other.61 Simon
Longstaff, for example, questions such underlying assumptions:
I ’v e l o s t c o u n t o f t h e n u m b e r o f t i m e s I h a v e h e a r d it p r o c la i m e d th a t t h e p r in c ip a l
d u ty o f d ir e c t o r s i s t o ‘m a x i m is e r e tu r n s t o s h a r e h o ld e r s ’ . W e l l , i s t h is r e a l l y s o ?
W h o s a y s s o ? W h y ? M o r e im p o r ta n t s t ill, i f s u c h a d u t y d o e s e x is t , t h e n s h o u ld it?
I n a s im ila r v e in , i t i s o f t e n a s s e r t e d th a t c o m p a n y d ir e c t o r s h a v e a d u t y t o ‘a c t in th e
in t e r e s t s o f a ll s t a k e h o ld e r s ’. O n c e a g a in w e m i g h t a sk : ‘W h a t m a k e s a s t a k e h o ld e r
a s t a k e h o ld e r in th e f ir s t p l a c e ? W h y s h o u l d c o m p a n y d i r e c t o r s d o a n y th in g f o r n o n
s h a r e h o ld e r s a t a ll? W h a t h a p p e n s w h e n o n e s t a k e h o ld e r ’s in t e r e s t s a r e a t o d d s w it h
a n o th e r [ s u c h a s t h o s e o f s h a r e h o ld e r s ] , w h ic h t h e y o f t e n a r e ? ’62
Thus, positing a linear or bi-polar relation between two notional ‘shareholder’

and ‘stakeholder’ extremes is not the only way to view models of corporate
responsibility. Nevertheless, focusing on broad differences between
‘shareholder’ and ‘stakeholder’ perspectives has some analytical use.
The shareholder view has strengths and weaknesses. It makes collective
business enterprise possible. It recognises the importance of generating wealth
for individuals and society ‘through the collective investment by individuals in a
common enterprise’.63 It makes a shareholder’s interest an easily transferable and
exchangeable commodity. It emphasises the responsibility of corporate
managers, officers and advisers to make prudent financial decisions and
investments with other people’s money. It respects the different interests, needs
and expertise of owners and managers. It promotes direct accountability to those
with direct stakes in the corporation. It recognises that communities benefit
overall if corporate benefits for the community (eg, employment, wealth, new
discoveries, philanthropy and sponsorship) exceed the externalised costs of
corporate profitability for the community (eg, environmental damage). It also
60 This comment goes to making corporate motivations responsive to social ends rather than competitive
with them: Roundtable, ‘Corporate Citizenship: A Conversation Among the Law, Business and
Academia’ (2000) 84 Marquette Law Review 723, 737-8.
61 See Doug Branson, ‘The Very Uncertain Prospect o f “Global” Convergence in Corporate Governance’
(Paper presented at the Corporate Law Teachers’ Association Seminar, Melbourne, 3 May 2001); Cindy
Schipani, ‘The Purposes and Accountability o f the Corporation in Contemporary Society: Corporate
Governance at a Crossroads’ (Paper presented at the CLTA/CCLSR Seminar, University o f Melbourne,
June 2001). On the summary o f ideas and the discussion which follows about the strengths and
weaknesses o f shareholder and stakeholder perspectives generally, see Roundtable, above n 60, especially
the contributions o f Professor Larry M itchell on short-termism in stockholding and management
strategies and Reverend Robert Sirico on tensions between shareholder and stakeholder perspectives and
promoting social ends as ‘market incentives’ for responsible corporate behaviour.
62 Longstaff, above n 52, 51.
63 Roundtable, above n 60, 734.
recognises that corporations are organisations which promote the social goods of
free association, enterprise, wealth creation, individual empowerment, private
ownership, individual financial security and ‘dissemination of ideas and the
distribution of goods’ - all of which are important in a civil society.64 On the
other hand, in practice it gives greater priority to shareholder interests and profits
than to ‘moral norms’ and social needs.65 It also exerts a gravitational force
which favours short-term interests of current shareholders over long-term
interests of both ‘inner circle’ stakeholders (eg, employees, customers and
creditors) and ‘outer circle’ stakeholders (eg, regulators and the community),
especially if performances measures and investment decisions are all focused on
changes in relatively short time-frames.
At the same time, Australian and international developments in ‘triple bottom
line’ corporate governance such as the global Dow Jones Sustainability Index
(‘DJSI’), the Age/Sydney Morning Herald Good Reputation Index (‘GRI’),66
ethical investment fund guidelines, and the appointment of investment managers
to advise large superannuation funds on environmental, social and corporate
governance all point towards a blurring or integration of shareholder and
stakeholder concerns. For example, Westpac has instituted a Social
Responsibility Committee at board level, and recently became the first
Australian and fifth global financial institution to report against new United
Nations-sponsored socioeconomic and environmental indicators.67 Westpac also
publicly declares that it supports and complies with Just Business, Amnesty
International’s human rights framework developed for Australian companies.68
The law now requires directors’ annual reports to explain details of corporate
compliance with relevant environmental regulation,69 and product disclosure
statements for investment products concerning superannuation, managed funds
and life insurance must include information about ‘the extent to which labour
standards or environmental, social or ethical considerations are taken into
account in the selection, retention or realisation of the investment’ 70
In the public sector, ‘triple bottom line’ concerns are already being integrated
with organisational responsibilities. For example, the corporate plan for federal
government business enterprises must include reference to ‘non-financial
performance measures’ and ‘community service obligations’ as well as financial
measures,71 while chief executives of federal agencies must conduct agency
64 Ibid 732, 740.

65 Ibid 7 3 4 -5
66 The GRI ranks the top 100 Australian companies in terms o f employee management, environmental
performance, social impact, financial performance, market position, and management, ethics and
governance.
67 ‘Bank Extols Openness in “Power” Era’, Australian Financial Review (Sydney), 18 July 2002, 4.
68 Amnesty International Australia, Just Business: A Human Rights Framework fo r Australian Companies
(2001) <http://www.amnesty.org.au/whatshappening/business/ai_justbusiness.rtf> at 3 October 2002.
69 Corporations Act 2001 (Cth) s 299(l)(f).
70 Corporations Act 2001 (Cth) s 1013 d (1)(1).
71 Commonwealth Authorities and Companies Act 1997 (Cth) s 17(6).
affairs in ways which promote ‘efficient, effective and ethical use’ of public
resources.72
Might this reflect a wider trend towards abandoning the old mentality which
positions profitability and corporate citizenship often in oppositional terms, and
adopting a new mentality in which social ends and better measurement of them
become part of the market incentives for corporate social responsibility?
Concerns about directors somehow compromising their primary duties to
shareholders or sacrificing profits, stock value and shareholder returns if too
much is done by a company to become a ‘triple bottom line’ corporation tend to
fall away when precise non-economic performance indicators (eg, employee
satisfaction, corporate ethical reputation, social impact studies, community
service obligations etc) become accepted corporate and individual performance
benchmarks as a matter of law and self-governance. After all, compliance with
anti-pollution and workplace safety laws to prevent harm to employees and the
environment unquestionably increases the costs of business but nobody seriously
frames this in terms of unjustified detraction from the financial bottom line or
something which compromises the primary directive to satisfy shareholder
interests.
Similarly, on its own, the stakeholder view has strengths and weaknesses. It
reflects the more complex reality that corporations have ‘multiple relationships’
internally and externally, with many individuals and groups being affected by the
corporation’s actions and decisions.73 It recognises more fully both the
connection between shareholder and stakeholder interests and how corporations
respond to them in multiple ways. Managers therefore can understand more
completely how their financial decisions are not made in a socioeconomic
vacuum and are part of ‘a larger social whole’.74 It suggests an alternative
philosophical basis for corporate existence, in terms beyond a simple compact
between companies and their shareholders. On the other hand, in some forms it
can insufficiently recognise that the interests of shareholders and stakeholders
are qualitatively different in many ways. It can compromise or sacrifice the
interests of those who run or own the corporation, and who hence have the most
direct individual stake in it, in terms of investment, capital and ownership, for
the sake of ‘some other social good’.75 It does not offer any self-evident or easy
way of ‘adjudicating the competing demands of various groups’ of shareholders
and stakeholders in terms which can be sheeted home to directors, officers and
other corporate decision-makers and advisers in terms of specific guidance.76
Perhaps it is even time to reformulate the classic proposition that corporate
directors and officers must act primarily in the best interests of the corporation
and its shareholders. Developments such as the emergence of the ‘sustainability
investor’ signal new ways of configuring it. According to Mills, for example,
corporate sustainability might be described as a business approach which creates
72 Financial Management and Accountability Act 1997 (Cth) s 44.

73 Roundtable, above n 60, 735.
74 Ibid.
75 Ibid 736.
76 Ibid.
and sustains long-term shareholder value by both embracing opportunities and

managing risks derived from economic, environmental and social factors.77
Taking another example cited by Mills, Shell reportedly now views its
contribution to sustainability coming from the value-adding contribution which it
makes to a stable socioeconomic system through pursuit of its business values to
attract and develop capital and talent.78 This idea that business sustainability
rests fundamentally on a stable underlying socioeconomic system mirrors the
recognition by social commentators such as Eva Cox that social capital is a
precondition for economic capital and business growth, rather than the other way
around, just as a stable politico-legal system is a precondition for business
certainty and confidence. These are important developments in shifting business
and regulatory mindsets to connect commercial reality to an underlying
regulatory, economic, social and environmental framework. All of this supports
the more expansive ways of framing governance outlined earlier in this article.
The compartmentalisation of corporate decision-making which occurs in
reductionist approaches to ‘the bottom line’ in assessments of corporate and
shareholder interests is most exposed in those hard cases where proper attention
to ‘the best interests’ of the corporation and its shareholders requires decision
making which is not framed in purely financial terms of dividends and stock
values even if it is otherwise properly shareholder-focused. Everybody worries
most about wider concerns like business ethics, regulatory compliance, corporate
governance and corporate citizenship when corporate behaviour or inaction
results in an economic, social, legal, or public relations disaster like a mine or
gas explosion, the Exxon Valdez environmental oil spill, or the next Enron,
WorldCom, EUH, or One.Tel. However, those wider concerns are always present
and always affect good corporate decision-making.
It is true that this wider conception and integration of corporate and
shareholder best interests must itself be viewed multi-dimensionally. Some
directors of corporations will agree with the wider conception of corporate and
shareholder interests but also insist that anything beyond minimum regulatory
compliance, minimum incorporation of industry standards, minimum adoption of
‘best practice’ corporate governance standards, and minimum but significant
community involvement runs the risk of detracting too much from the
(single/financial) bottom line. Equally, who could accept that guidance for any
of these decisions adequately comes from sweeping guidelines like ‘the bottom
line is the only line’, ‘our business is making money’, ‘our primary responsibility
is to shareholders’, ‘ethics is good business’, ‘private corporations have public
responsibilities’, or even ‘the triple bottom line is the new reality’? What is in
question here is the extent to which unnecessarily compartmentalised thinking
and mono-dimensional conceptions of a corporation’s ‘best interests’ really
caricature and cloak the complexity of ‘real life’ decision-making factors
operating on those at the corporate coal-face, whether they are conscious of them
or not.
77 M ills, above n 27.

78 Ibid.
What are the elements of community-sensitive corporate regulation and

promotion of corporate citizenship?79 Might it envisage government regulation to
require all corporations and organisations to spend a minimum percentage of
their profit on internal training and education as well as external community
service and pro-bono work? Would it extend to awarding government tenders on
criteria which tie successful tendering to a nominated minimum percentage of
key decision-makers in a tendering organisation coming from women or minority
groups promoted through affirmative action, or by reference to other rights-
enhancing criteria beyond price and capacity to deliver results, such as social
audits as well as accountability and compliance mechanisms for citizens to seek
redress from corporations in the private sector who deliver public services on
behalf of government under outsourcing arrangements?80 Would it encompass
quality accreditation according to criteria which include compliance with equal
opportunity measures and community support? Might it even embrace national
prosperity measures which include social indicators as well as economic ones in
any formally recognised assessment of a nation’s prosperity? Might international
trade agreements be predicated upon the record of human rights compliance by
countries and corporations alike? Could governments assist through laws which
go beyond simply regulating abuses like misuse of market power by dominant
commercial parties (like part IV of the Trade Practices Act 1974 (Cth)) into
areas of commercial fairness and reasonableness between parties (as parts V and
IVA of the Trade Practices Act 1974 (Cth) increasingly seem to do)? Might
powerful governments and global institutions adopt policies against financial
support for projects ‘that knowingly involve encroachment on traditional
territories being occupied by tribal people, unless adequate safeguards are
provided’?81
On some wider levels, of course, all of this reflects what has been said before
(and better) by others about ‘the interdependence of business ethics, economics,
and law at the point of their interface’.82 Indeed, the broad division between the
two opposing camps is stark:
A t h r e s h o ld i s s u e t o b e c o n s i d e r e d is t h e r e la t io n s h ip o f b u s i n e s s a n d s o c i e t y a n d ,
m o r e p a r tic u la r ly , w h e t h e r c o r p o r a te b e h a v io u r s h o u l d c o n f o r m t o t h e m o r a l n o r m s
o f s o c i e t y g e n e r a lly . . . T h e a m o r a l v i e w , e p i t o m is e d i n th e v i e w s o f M il t o n
F r ie d m a n , d o m in a t e d th e t h in k in g o f t h e w e s t e r n w o r ld u n t il a s r e c e n t ly a s th e
1 9 6 0 s , m a k in g a b r i e f c o m e b a c k in t h e 1 9 8 0 s . I t i s f o u n d e d o n t h e p r i n c ip le s o f s e l f -
in te r e s t, t h e f r e e m a r k e t, p r o f it m a x im is a t io n , a n d t h e h i g h e s t r e tu r n t o s t o c k h o ld e r s ,
a n d e s p o u s e s a f o r m o f in d iv i d u a li s t i c c a p i t a li s m w h e r e g o v e r n m e n t p l a y s a
79 Additional suggestions appear in Diagram 2 at the end o f this article.

80 Chris Merritt, ‘Private Sector Needs Work on Public Redress’, Australian Financial Review (Sydney),
2 June 2000, 35.
81 See the World Bank policies and reports referred to by former Australian senator, Margaret Reynolds, in
her submission to the Joint Parliamentary Committee on Native Title and the Aboriginal and Torres
Strait Islander Land Fund for its inquiry into the consistency o f the Native Title Amendment Act 1998
(Cth) with Australia’s international obligations under the Convention on the Elimination o f All Forms o f
Racial Discrimination, opened for signature 21 December 1965, 660 UNTS 195 (entered into force 4
January 1969). The submission is reproduced in Margaret Reynolds, ‘Three Steps Towards Overcoming
the Impasse’, Land Rights Queensland (Brisbane), April 2000, 7.
82 Sappideen, above n 54, 422.
m i n i m a li s t r o le , p r o t e c t in g p r o p e r t y r ig h t s a n d e n c o u r a g in g t h e p u r s u it o f p r o f it
m a x i m is a t io n w i t h a v i e w t o e n s u r in g th e g r e a t e s t p r o s p e r it y . I ts f u n d a m e n t a l te n e t,
th a t e c o n o m i c r e la t io n s s h o u l d b e b a s e d e n t i r e ly o n t h e e x c l u s i v e p u r s u it o f s e l f -
in t e r e s t , c o n t r a s t s w i t h th e r e q u ir e m e n t in m o s t e t h i c a l t h e o r ie s th a t t h e in t e r e s t s o f
t h o s e a f f e c t e d b y o n e ’s d e c i s i o n s s h o u l d b e t a k e n in t o a c c o u n t .
B y c o n tr a s t, t h e m o r a l u n i t y v i e w t a k e s in t o a c c o u n t t h e in t e r e s t s o f e m p l o y e e s ,
c u s t o m e r s a n d s o c i e t y , a n d e m p h a s is e s c o - o p e r a t io n , in t e r p e r s o n a l h a r m o n y , a n d t h e
in t e r d e p e n d e n c e o f t h e i n d iv i d u a l a n d c o m m u n it y . 83485
As is now apparent, some of these notions — for example, the freedom and
neutrality of market forces, and the correctness of a minimalist approach to
governmental regulation — are controversial and need justification. Some of
them (eg, returns to shareholders and profit-maximising) can be viewed one-
dimensionally in financial and self-interested terms or multi-dimensionally in
wider and interconnected terms.
Such ‘big picture’ dynamics also have cross-national and cross-disciplinary
manifestations. For example, the concern of Japanese communitarian capitalism
for the three intertwined strands of the common good — ie, the pursuit of
happiness and prosperity, the concern for justice and fairness, and the
affirmation and importance of community84 — has some correlation to the three
intertwined strands of the ‘triple bottom line’ for companies, in terms of profits,
the environment, and the community, at least in terms of a multi-layered
approach to corporate interests. This is similar to the claim of philosophers that
one’s own self-interests and preferences, properly considered, can embrace a
variety of interests and be both self-actualising and other-centred, including an
individual desire to promote justice and prosperity for one’s self and others.85 In
that light, who can deny that the impact of corporate conduct on others and a
desire to treat those affected by corporate conduct fairly and justly, together with
a desire to promote social well-being as well as individual shareholder
prosperity, are all part of a much more complex and multi-layered framework
within which directors and shareholders alike must conceive of the best interests
of a corporation and its shareholders? As High Court watchers will tell you,
today’s heresy is often tomorrow’s orthodoxy.
83 Ibid 423.
84 Ibid 4 2 2 -3 . C f David Coates, Models o f Capitalism: Growth and Stagnation in the Modern Era (2000).
O f course, drawing such broader comparisons between communitarian capitalism and ‘triple bottom line’
thinking says nothing directly about the moral status and responsibilities o f corporations under either
approach. Moreover, Japanese corporate governance has more com plex elements than this contrast
suggests: see Shishido, above n 23.
85 See also Sappideen above n 54; Charlesworth, above n 53.
V II C O R PO R A TIO NS A N D TH E ‘TRIPLE B O T T O M L IN E ’
T h e i s s u e o f h u m a n r ig h t s i s c e n tr a l t o g o o d c o r p o r a te c it i z e n s h i p a n d t o a h e a lt h y
b o t t o m lin e . M a n y c o m p a n i e s f in d s tr e n g th in th e ir h u m a n r ig h t s r e c o r d s ; o th e r s
s u f f e r t h e c o n s e q u e n c e s o f ig n o r in g t h is v it a l p a r t o f c o r p o r a t e l if e . T o d a y , h u m a n
r ig h t s is a k e y p e r f o r m a n c e in d ic a t o r f o r c o r p o r a t io n s a l l o v e r t h e w o r ld .
- Mary Robinson, UN High Commissioner for Human Rights, launching Business and
Human Rights: A Progress Report (2000).86
[ I ] t m a k e s g o o d b u s i n e s s s e n s e a n y w a y f o r e x e c u t i v e s t o t a k e a c c o u n t o f th e
in t e r e s t s o f , a n d w o r k c l o s e l y w it h , k e y s t a k e h o ld e r g r o u p s a n d l o c a l c o m m u n it ie s .
. . . T r ip le B o t t o m L i n e R e p o r t in g s e e k s to e le v a t e f u z z y a n d s u b j e c t i v e c o n c e p t s a n d
p l a c e s t h e m a l o n g s i d e o b j e c t i v e a n d m e a s u r a b le r e p o r t in g o f f i n a n c i a l o u t c o m e s . . . .
[ C j o m p a n i e s h a v e m o r e th a n e n o u g h o n t h e ir p la t e s w it h S i n g le B o t t o m L in e
R e p o r t in g . . . . A n y p r a c t ic e th a t in t e r f e r e s w i t h a c o m p a n y ’s a b ilit y t o a c h i e v e it s
f i n a n c ia l o b j e c t i v e s . . . is t a n ta m o u n t t o ‘k i l li n g t h e g o o s e th a t la y s t h e g o l d e n e g g ’ .
—Australian Shareholders’ Association.87
T r ip le b o t t o m lin e a c c o u n t i n g r u n s th e r is k o f t o k e n i s m , a n d i s a p o o r s u b s t it u t e fo r
a m o r e tr a d it io n a l, i n c l u s i v e n o t i o n o f e c o n o m ic a c c o u n t a b ilit y . . . . I f r e g u la t io n s ,
t a x e s a n d s u b s id ie s c a n b e d e s i g n e d to a c c o u n t f o r e n v ir o n m e n t a l a n d o th e r
e x t e r n a lit ie s (th a t i s ‘in t e r n a lis in g e x t e r n a l it i e s ’) t h e n t h e r e i s n o n e e d f o r t r ip le
b o t t o m l in e a c c o u n t in g ; t h e s e fa c to r s w i l l b e c o v e r e d w i t h in th e n o r m a l a c c o u n t in g
m e tr ic s . . . . A n d w e d o n o t n e e d t r ip le b o t t o m l in e r e p o r t in g t o w i d e n th e m e a n in g o f
r e s p o n s ib i li t y to s h a r e h o ld e r s . A s A u s t r a lia m o v e s t o m a s s s h a r e o w n e r s h ip , t h r o u g h
d ir e c t o w n e r s h ip a n d p e n s i o n f u n d s , f ir m s a r e g o i n g t o h a v e t o c o n s i d e r c a r e f u l ly
w h a t i s m e a n t b y ‘s h a r e h o ld e r i n t e r e s t ’ . T h e s h a r e h o ld e r o f a b a n k i s a l s o a u s e r o f
th e b a n k in g s y s t e m . T h e s h a r e h o ld e r in a c h e m ic a l c o m p a n y w a n t s a c le a n , s a f e
e n v ir o n m e n t . T h e s h a r e h o ld e r i n a n a ir lin e is a l s o a n e m p l o y e e w h o s e e k s j o b
s e c u r it y .
—Economist Ian McAuley, advocating an expansive notion of economics to replace the

mirage of ‘triple bottom line’ accounting.88
To this point, the main argument is that the notion of ‘being a good corporate
citizen’ is no longer reducible to narrowly conceived financial and economic
considerations like maximising shareholder profits. Increasingly, the ‘triple
bottom line’ for corporations and their shareholders requires a much more
complex and multi-dimensional conception of the best interests of the
corporation and the best interests of shareholders. As human rights specialist
David Kinley notes:
T h e d e v e lo p m e n t o f a c o r p o r a t e s o c i a l c o n s c i e n c e is t o d a y o f t e n c la im e d . T h e
p h e n o m e n o n o f th e ‘tr ip le b o t t o m l i n e ’ h a s n o w e n t e r e d c o m m e r c i a l p a r la n c e — i e
n o t j u s t a c o n c e r n t o m a k e a p r o f it , b u t a l s o t o p r o t e c t th e e n v ir o n m e n t a n d to a id
86 Office o f the High Commissioner for Human Rights, Business and Human Rights: A Progress Report
(2000), <http://www.unhchr.ch/business.htm> at 4 October 2002.
87 Australian Shareholders’ Association, Triple Trouble fo r the Bottom Line (2001), <http://www.asa.asn.
au/Archive.asp?ArchiveID=142> at 4 October 2002.
88 Ian M cAuley, ‘In Defence o f Econom ics — Why Public Policy D oesn’t Need the Triple Bottom Line’
(Paper presented at the National Institute for Governance Triple Bottom Line Seminar, Canberra, 7
November 2001).
s o c i a l p r o g r e s s ( t h o u g h it m i g h t b e a r g u e d th a t th e p u r s u it o f t h e l a s t t w o w i l l,
u lt im a t e ly , fu r th e r s u p p o r t t h e p r o f it m o t i v e ) .89
The ‘triple bottom line’ of profit, environmental impact and social
contribution also connects to ethical considerations which are crystallised in the
common idea that ‘ethics is good business’. It dovetails with the
interconnectedness of economic, social and other criteria in evaluating what it
means for corporations to maximise returns for shareholders. Shareholders’
concerns are multi-dimensional and not solely profit-oriented at the expense of
other considerations. At the same time, ethical behaviour can sometimes
maximise profits in the long-term, as when corporations act in good ways legally
and ethically which avoid class actions, environmental disasters, public relations
disasters and anything else which ultimately has a bad effect upon ‘the bottom
line’, viewed in purely profit-based terms. Of course, the real test for corporate
citizenship occurs when doing the right thing has at least a short-term
detrimental effect on profitability. The lines of judgment need not be clear-cut.
For example, at what point should a company order a product recall or notify
police after receiving, investigating and evaluating an extortion threat involving
product contamination and public health and safety? Conversely, when would
shareholders tolerate reduced profits and dividends because of enhanced
safeguards, standards, procedures and actions based on social responsibility but
without back-up legal compulsion?
Indeed, some of the myths surrounding ethical corporate conduct and human
rights need exploding. The commercial rationale behind ‘ethics is good business’
and ‘compliance is profitable’ sometimes competes with the ethical rationale
behind ‘doing the right thing for the right reason’. The rationale behind
sentiments like ‘ethics is good business’ and ‘doing unto others as you would
want them to do unto you’ needs exploding, as it is simply one form of
‘enlightened self-interest’.90 As Professor Max Charlesworth highlights,
recognising that cheating or maltreating others does not pay because they are
likely to do the same to you is not an ethical position, unlike recognising that
cheating or maltreating is an act of injustice towards others which involves using
them instrumentally as a means to secure your self-interested ends without
adequate concern for other people and other interests worthy of concern. On this
view, something more is revealed here than simply the difference between an
ethical perspective and a pragmatically commercial business perspective.
Much of the literature on corporate governance, business ethics, corporate
citizenship and business convenience presupposes one of three basic visions of
the relationship between corporations, their directors and shareholders, and the
wider community. According to the first vision, the bottom line is the only line,
in the sense that corporate profitability and financial returns to shareholders are
the only meaningful benchmarks of corporate performance and responsibility.
According to the second vision, the bottom line is the predominant line, in the
89 David Kinley, ‘Human Rights as Legally Binding or Merely Relevant?’ (Paper presented at the
Commercial Law and Human Rights Conference, Australian National University, 24—25 September
1999).
90 Charlesworth, above n 53, 192.
se n se that corp orate p r o fita b ility and fin a n c ia l returns to sh areh old ers are n o t the
e x c lu s iv e b en ch m ark s, b u t certa in ly o u tw e ig h a ll oth er co n sid e ra tio n s o f so c ia l
r e sp o n sib ility and co n ce rn for n o n -e c o n o m ic in terests, e s p e c ia lly w h er e th ey
co m p e te w ith p ro fita b ility and sh areh old er returns. A c c o r d in g to th e third v isio n ,
corporate p ro fita b ility and fin a n c ia l sh areh old er returns ca n n o t sim p ly b e
a s s e s s e d o n a sin g le s c a le w h e r e th e y p red o m in a te o v er o th er n o n -e c o n o m ic and
n o n -sh a reh o ld er in terests, b ut rather m u st b e v ie w e d in term s o f th eir sy m b io tic
rela tio n sh ip w ith regu latory requ irem en ts, e th ica l b u sin e ss p ra ctic es, co m m u n ity
r e sp o n sib ilitie s and s o o n .91 A fte r a ll, n o b o d y se r io u sly su g g e sts p u b lic ly that
b u sin e ss e th ic s sh o u ld b e sa c r ific e d fo r co m m er cia l g a in b e c a u se o f th e c o s tly
im p a ct o f e th ica l b eh aviou r. A c c o r d in g to a fou rth and s lig h tly ‘o f f c e n tre’
v is io n , th e n o tio n o f ‘th e b o tto m lin e ’ m u st i t s e lf b e refram ed to a cco m m o d a te
n o t o n ly so m e th in g m o re than corporate p ro fita b ility and fin a n c ia l returns to
sh a reh old ers, b ut a lso th is sy m b io tic rela tio n sh ip b e tw e e n corporate e x iste n c e ,
corporate a c tiv itie s, corp orate p ro fita b ility , corporate m a n a g em en t, fin a n c ia l
returns to sh areh old ers, eth ica l b u sin e ss co n d u ct, reg u la to ry an d p o lic y
requ irem en ts, corp orate citiz e n sh ip and oth er s o c ia l r e sp o n sib ilitie s.
O n e k e y c h a lle n g e for ‘trip le b o tto m lin e ’ corp o ra tio n s is to in corp orate ‘trip le
b o tto m lin e ’ d ecisio n -m a k in g p erfo rm a n ce criteria and d e c isio n -m a k in g
fram ew ork s in to th eir o rg a n isa tio n a l g o v er n a n ce , and to integrate th em w ith (or
e v e n su b stitu te th em fo r) c o n v en tio n a l ‘sin g le b o tto m lin e ’ th in k in g and
p ra ctices. T hat m ea n s a n um ber o f th in g s, in c lu d in g m e a n in g fu l w a y s o f
w e ig h in g im m ed ia te, ta n g ib le , e c o n o m ic factors (lik e current p ro fit m a rg in s and
b u d g e ts) and lon g-term , in ta n g ib le, n o n -e c o n o m ic fa cto rs (lik e su sta in a b ility and
corporate citiz e n sh ip ). T h is can b e a tou gh sh ift in m in d se t fo r d irectors and
a d v isers, and it is n o t m a d e an y ea sie r b y la w s o n d irecto rs’ d u ties w h ic h still
la rg ely f o llo w the o rth od ox translation o f ‘a ctin g in th e b e st in terests o f th e
co r p o r a tio n ’ in to ‘a ctin g in th e b e st fin a n c ia l in terests o f th e sh a reh o ld e rs’.92
H o w d o w e sa tisfa c to rily a cco m m o d a te th e te n sio n b e tw e e n a c o m p a n y ’s le g a l
and fin a n c ia l r e sp o n sib ilitie s and its w id e r so c ia l r e sp o n sib ilitie s ( i f an y ), and the
flo w -o n im p lic a tio n s for th e d u ties and lia b ilitie s o f corp orate d irectors, o ffic e r s,
an d a d visers?
91 This is not too far from the position o f corporatised government entities which are not only hybrid
creatures which operate like non-government corporations in the private sector on levels o f
commerciality and profitability, but also operate as government corporations in the public sector in terms
o f accountability and public interest requirements. In addition, corporatised government entities grapple
with the concept o f their officers having a legal obligation to act in the best interests o f shareholders who
are often ministers o f state, whose interests are directly connected to governmental and public interests,
who might need to take account o f government policies to one degree or another, who may be subject to
some degree o f governmental direction in the public interest, and who have community service
obligations as w ell as profit-making imperatives to meet. The conventional paradigm o f exclusive focus
upon corporate profitability and financial returns to shareholders to the exclusion o f other interests fits
such entities uneasily.
92 O f course, there are wider debates here about matters like the likelihood o f global convergence towards
an American-based contractarian model o f governance and what that means for meaningful incorporation
o f ‘triple bottom line’ measures in corporate regulation and decision-making: see Branson, above n 61;
Bradley et al, above n 22.
E c o n o m ist Ian M c A u le y c o m m en ts o n th e te n sio n b e tw e e n th e se d ifferen t

corporate r e sp o n sib ilitie s.93 H is m ain argu m en t is d ou b le-b arrelled : ‘triple
b o tto m lin e ’ a c c o u n tin g d istorts th e true rela tio n sh ip b e tw e e n th e e c o n o m y ,
s o c ie ty and th e en viron m en t, w h ile a narrow v ie w o f e c o n o m ic s treats p u b lic
p o lic y and a c c o u n ta b ility n a rro w ly in term s o f b u d g eta ry a c c o u n ta b ility and
fin a n c ia l c o sts. In h is v ie w , ‘[sjo u n d e c o n o m ic m a n a g em en t sh o u ld b e co n cern ed
w ith th e so c ia l c o n se q u e n c e s o f p o lic ie s , and sh o u ld b e ju s t as co n c e r n e d w ith
en viro n m en ta l r e so u r ces as w ith oth er r e so u r c e s’, le a d in g th e w a y tow ard s ‘a
m o re tradition al, in c lu s iv e n o tio n o f e c o n o m ic a c c o u n ta b ility ’ fo r p u b lic p o lic y
p u rp o ses w h ic h a v o id s th e a rtificia l d istin c tio n s w h ic h at le a st so m e ‘triple
b o tto m lin e ’ n o tio n s create b e tw e e n e c o n o m ic , so c ia l and en v iro n m en ta l a sp ects
o f a cc o u n ta b ility . O n th is v ie w , th o se th ree a sp ects ‘are in c lu siv e , n o t e x c lu s iv e
as im p lie d in th e trip le b o tto m lin e stru ctu re’, and th e sep aration o f th em is
lin k ed to ‘a th in n ed d o w n c o n c e p t o f e c o n o m ic s ’ w h ic h is o la te s so c ia l and
en viro n m en ta l co n ce rn s from e c o n o m ic a n a ly sis and red u ces th e latter to
‘b u d getary b o o k k e e p in g ’ and fin a n c ia l a cc o u n tin g . In oth er w o r d s, ex p a n d y o u r
h o r iz o n s to em b race e c o n o m ic a n a ly sis in its fu lle st form and th ere is n o r o o m or
n e e d for ‘trip le b o tto m lin e ’ th ink in g.
O f co u rse, in tegratin g so c ia l and en viron m en ta l m e a su res w ith in a p rop erly
a m p lifie d v ie w o f e c o n o m ic s is o n ly a starting p oin t. W id er d y n a m ic s and issu e s
are at stak e h ere to o . T h e regu latory la w s and rep ortin g and d isc lo su r e standards
g o v er n in g co m p a n ies and th eir o ffic e r s and a d v isers m u st a lso k e e p p a c e w ith
th e s e e c o n o m ic , so c ia l and en viro n m en ta l d ev elo p m en ts. S im ila rly , w h ile so m e
p la n n in g , rep ortin g and a c c o u n tin g o b lig a tio n s u nd er m ajor corp orate le g isla tio n
lik e th e Corporations Act 2001 (C th ) (c o v e r in g co m p a n ies g e n er a lly ) and the
Commonwealth Authorities and Companies Act 1997 (C th ) (c o v e r in g
g o v ern m en t co rp oration s at th e fed eral le v e l) are starting to in c lu d e m e a n in g fu l
r e fer en ce to en viro n m en ta l and c o m m u n ity o b lig a tio n s r e sp e c tiv e ly , m u ch m o re
n e e d s to b e d o n e to rem ed y th e p resen t b ia s to w a rd s fin a n c ia l m ea su rem en t o f
th e n arrow est kind. In ad d ition , corporate p la n n in g m ig h t em b ra ce n o t o n ly
strategic and fin a n c ia l p la n s b u t a lso corp orate citiz e n sh ip an d h u m an righ ts
m a n a g em en t p la n s. In d eed , A M P r e c e n tly b o a sted ab ou t ‘in c lu d in g su sta in a b le
b u sin e ss is s u e s w ith in ou r strategic p la n s ’, and a lso la u n ch ed ‘a so c ia lly
r e sp o n sib le in v e stm e n t p rod u ct c a lle d “ S u sta in a b le Future F u n d s’” .94 W ith in
o rg a n isa tio n s, n o n e o f th is w o rk s u n le ss b o th o rg a n isa tio n a l and in d iv id u a l
p erfo rm a n ce and re sp o n sib ility are tie d to th e se w id e r co n sid e ra tio n s as part o f
in stitu tio n a l and p erso n a l p erfo rm a n ce in all o f th e w a y s that co u n t — p la n n in g ,
reso u rcin g , p erform an ce m easu rem en t, p a y , p ro m o tio n , d ecisio n -m a k in g , and so
o n .95
A t a p u b lic p o lic y and regu latory le v e l, m o re w o r k n e e d s to b e d o n e to
d e v e lo p m e a n in g fu l m ea su res o f so c ia l and en v iro n m en ta l p erform an ce.
S im ila r ly , at an in stitu tio n a l le v e l, m ore m u st b e d o n e to relate su ch m e a su r es to
93 McAuley, above n 88.

94 AM P, Shareholder News, August 2001, 2, <http://www.amp.com.au/shareholdercentre> at 4 October
2002.
95 See Diagram 1 at the end o f this article.
o rg a n isa tio n a l and in d iv id u a l p erform an ce in d icato rs. N e w ly in tro d u ced in 1 9 9 9 ,

th e D o w J on es S u sta in a b ility G roup In d ex m ea su res su sta in a b ility as a
p erfo rm a n ce ind icator. F o llo w in g in th is v e in , th e Age and Sydney Morning
Herald G o o d R ep u tation In d ex (p u b lish e d sin c e 2 0 0 0 ) m ea su res th e
p erfo rm a n ce o f A u str a lia ’s la rg est co m p a n ies in term s o f corp orate g o v er n a n ce ,
m arket p erfo rm a n ce and p o sitio n , m a n a g em en t and e th ic s, e m p lo y e e rela tio n s,
and so c ia l an d en viro n m en ta l im p act. T o sh ift th e m o n o -d im e n sio n a l fo c u s o f
b u sin e ss, th e fin a n c ia l p ress and g o v er n m en ts u p o n G ro ss D o m e stic P rod u ct
( ‘G D P ’) as a d efa u lt in d icator o f so c ie ta l w e ll-b e in g , th e A u stra lia In stitu te h as
d e v e lo p e d th e G en u in e P ro g ress In dicator ( ‘G P I’) to m ea su re n o t sim p ly th e total
a m o u n t o f p ro d u c tio n b u t a lso w h at that rep resen ts in term s o f th e total am ou n t
o f co m m u n a l w e ll-b e in g . H e n c e , it a lso m e a su res th e am ou n t o f r e so u r ces u se d
to a c h ie v e th e total am ou n t o f p rod u ction , th e d istrib u tio n o f p ro d u ctio n and
in c o m e , th e s o c ia l c o sts o f p ro d u ctio n , th e im p a ct o f e c o n o m ic a c tiv ity o n h um an
h ea lth and righ ts, th e v a lu e o f h o u se h o ld w o r k as a n e g le c te d a sp ect o f
p ro d u c tio n and an y ‘d ep r e c ia tio n ’ o f th e en v iro n m en t r e su ltin g fro m th e total
am ou n t o f p rod u ction . O f co u rse, m e a n in g fu l ch a n g e w ill o cc u r w h e n d iffer en t
s o c io e c o n o m ic co m m u n ity m e a su res an d regu lato ry g u id e lin e s f lo w th rou gh to
d iffer en t o rg a n isa tio n a l and in d iv id u a l p erfo rm a n ce m ea su res.
S o m e w ill sa y that th is is sim p ly a so p h istica ted w a y o f in tern a lisin g ex tern a l
co sts. S o m e w ill sa y that th is ig n o r e s th e co r e r e sp o n sib ility o f co m p a n ies to
th eir sh areh old ers. S o m e w ill sa y that th is ta k es u s to a n e w le v e l o f
u n d erstan d in g th e in tegrated e le m e n ts o f e c o n o m ic an d s o c ia l w e ll-b e in g and
m ea su rin g th em m ore a ccu rately, in w a y s w h ic h c h a lle n g e so m e c o n v en tio n a l
b u sin e ss and p u b lic v ie w s ab out corp orate r e sp o n sib ility and sh areh old er
in terests. P erhap s w e are on th e cu sp o f r e c o g n isin g eith er that, in so m e w a y s at
le a st, th e q u e stio n ‘Is it g o o d for sh a reh o ld e rs? ’, ca n n o t b e a n sw ere d in iso la tio n
fr o m th e q u estio n , ‘Is it g o o d for th e c o m m u n ity ? ’, or a ltern a tiv ely that th e y are
d iffer en t fa c ets o f the sa m e q u estio n .
O f c o u rse , d iffe r e n c e s b e tw e e n th e p u b lic and p riv a te sec to rs m atter h ere to o .
P u b lic sec to r e n titie s grap p le w ith q u a lita tiv e ly d iffer en t fea tu res o f ‘trip le
b o tto m lin e ’ d e c isio n -m a k in g in term s o f sp e c ia l fea tu res lik e con tractu al
in co rp oration o f so c ia l o b lig a tio n s in o u tso u rcin g and ten d erin g criteria and
a g re em e n ts,96 statu tory in corp oration o f c o m m u n ity se r v ic e o b lig a tio n s for
co rp o ratised e n tities, and ‘b a la n ce d sco r eca r d ’ a sse ssm e n ts fo r g o v ern m en ta l
au d itin g and fin a n c ia l m a n a g em en t p u r p o se s — a ll w ith in a m o d ifie d fram ew ork
o f le g a l d u ties fo r g o v ern m en t b u sin e ss en terp rises w h ic h m a n a g e th e te n sio n
b e tw e e n th eir p u b lic an d p rivate ch aracteristics. In d eed , th e statu tory charters o f
m a n y g o v ern m en t b u sin e ss en terp rises alread y r e fle c t so m e ‘trip le b o tto m lin e ’
co n ce rn s in th eir atten tion to e c o n o m ic , co m m u n ity and en v iro n m en ta l
o b je c tiv e s. A t th e sam e tim e , th e e x p a n sio n o f a llia n c e co n tra ctin g , o u tso u rcin g
and oth er p u b lic-p riv a te in tera ctio n s in c rea se s th e flo w -th r o u g h e f fe c t o f su ch
featu res from the p u b lic se c to r to p rivate se c to r b o d ie s en g a g e d b y g o v ern m en t.
96 See, eg, Tony Boyd, ‘Contracts with a Conscience’, Australian Financial Review (Sydney), 1 June 2001,
3.
In ad d ition , p u b lic se c to r e n titie s h a v e rela tio n sh ip s w ith sta k eh o ld ers w h ic h are

n o t c o m p le te ly su b su m ed w ith in th e n o tio n o f ‘trip le b o tto m lin e ’ th in k in g.
A s w ith m a n y d im e n sio n s o f p u b lic and p riv a te d e c isio n -m a k in g , w e h a v e n o t
y e t d o n e e n o u g h to p r o v id e d e c isio n -m a k e r s w ith m e a n in g fu l in fo rm a tio n ,
criteria, and d e c isio n -m a k in g m ea su r es w h ic h in corp orate e c o n o m ic and n o n
e c o n o m ic factors, in c lu d in g p ro fita b ility a s w e ll as a u d itin g fo r s o c ia l o u tc o m e s.
M o r eo v er , w e h a v e n o t y e t d o n e en o u g h to refram e th e c o n n e c tio n b e tw e e n
e c o n o m ic and s o c ia l cap ital, s o that d e c is io n s a b o u t th e b e st in terests o f a
co rp oration and its sh a reh o ld ers truly r e fle c t th e c o n n e c tio n b e tw e e n th e v a rio u s
fo rm s o f cap ital. C orporate rep u tation is a p o ten t b u sin e ss asset. It is a ffe c te d b y
p u b lic an d e m p lo y e e p e r c e p tio n s o f a co r p o r a tio n ’s reco rd o f so c ia l
re sp o n sib ility . B u s in e s s th rives in c o m m u n itie s w ith h ig h le v e ls o f trust and
s o c ia l cap ital, an d in tern ation al b en ch m a rk s in c r e a sin g ly p o in t to th e
in corp oration o f m ea su r es o f corp orate re sp o n sib ility an d s o c ia l a cc o u n ta b ility
in in v e stm e n t an d risk p r o file s.97
In short, ‘s in g le b o tto m lin e ’ th in k in g and b eh a v io u r w ill a lw a y s p rev a il u nder
a n y sy ste m o f corporate re g u la tio n in w h ic h ‘trip le b o tto m lin e ’ d ecisio n -m a k in g
and a ctio n s are p e r c e iv e d to b e a lw a y s and in h eren tly in c o n flic t w ith th e
c o m m er cia l b o tto m lin e o f p r o fita b ility and th e le g a l b o tto m lin e o f a d irecto r’s
d u ty to m a x im ise sh areh old er returns in s o le ly p erso n a l and fin a n c ia l term s. It
w ill a lso p rev a il u nd er a n y sy ste m o f corp orate reg u la tio n w h ic h n o t o n ly
fa v o u rs contractarian m o d e ls o f corp oration s b ut a lso in a d eq u a tely b u ild s ‘trip le
b o tto m lin e ’ and stak eh old er m e a su res in to its contractarian featu res.
A c c o r d in g ly , ‘trip le b o tto m lin e ’ rh etoric n e e d s to d em o n stra te eith er th at it is
co m p a tib le w ith th e ‘s in g le /fin a n c ia l b o tto m lin e ’ fo r sh a reh o ld ers or
a ltern a tiv ely , ju s tifia b le e v e n w h e r e th e in terests o f sh a reh o ld ers, ‘in n er r in g ’
sta k eh old ers and ‘ou ter r in g ’ stak eh old ers co m p e te. In w h a t w a y s m ig h t th is b e
a c h ie v e d and w h a t sh ifts in th in k in g are n e c e ssa r y ? 98
R e c o g n is e at th e o u tset that th ere is n o t n e c e ssa r ily a ze r o -su m rela tio n
b e tw e e n th e sin g le and trip le b o tto m lin e s, so that ‘trip le b o tto m lin e ’ d e c isio n s
m u st a lw a y s b e p e r c e iv e d to b e at th e e x p e n se o f th e fin a n c ia l b o tto m lin e . T h e
rela tio n sh ip b e tw e e n th e tw o c o n c e p tio n s o f b o tto m lin e s is m o re c o m p le x than
that, ju s t as th e co rp o ra tio n ’s n etw o rk o f internal and ex tern a l re la tio n sh ip s
p rev en ts crude a n a ly sis o f corporate and sh areh old er b est in terests. O f co u rse,
n o t a ll ‘trip le b o tto m lin e ’ m e a su res are c o st-fr e e (e g , en v iro n m en ta l c o m p lia n c e ,
n o n -m an d atory rep ortin g and d isc lo su r e , etc ) and so m e o f th em m ig h t u n d erm in e
sh ort-term p ro fit m a x im isa tio n , e s p e c ia lly fo r in v esto rs and traders lo o k in g to
trade shares in short tim e-fra m es and fo r corporate and in v e stm e n t m an agers
w h o s e rem u n eration and p erfo rm a n ce in d icato rs are tied to that tim efram e.
In th eo ry at lea st, th e b e s t in terests o f a corp o ra tio n and its sh a reh o ld ers n e e d
n o t b e e x c lu s iv e ly fram ed in fin a n c ia l or co n tin u o u s p ro fit-m a x im isa tio n term s.
97 Gary Cazalet, ‘Corporate Social Responsibility Special: Global Driving Forces’, City Ethics (Newsletter
o f the St James Ethics Centre), Winter 2000, 3.
98 Much o f the following discussion also responds to or draws on material from the Roundtable, above n
60.
S h a reh old ers h a v e in terests as corp orate m em b ers and co m m u n ity m em b ers
w h ic h ex ten d b e y o n d th e v a lu e o f th eir sh ares and d iv id en d s at a n y p o in t in tim e.
C o rp oration s m u st c o m p ly w ith la w s w h ic h m ig h t in c rea se c o s ts and d ecr ea se
p ro fits. H o w e v e r m u ch th is m ig h t b e r e sen ted or w e lc o m e d , th e y d o th is w ith o u t
a n y se r io u s su g g e stio n that le g a l c o m p lia n c e is contrary to corp orate in terests or
d ir ecto rs’ d u ties. S o , th e correla tio n b e tw e e n in c rea sin g c o s ts and d ecr ea sin g
p ro fita b ility , o n o n e hand, and a ctin g con trary to th e b e s t in terests o f a
corporation, o n th e other, is n o t au tom atic, a lth o u g h o b v io u s ly a serio u s q u estio n
im m e d ia te ly arises. Is th is ev e r ju s tifie d e x c e p t in circ u m sta n ces o f m an d atory
reg u la tio n w h er e th e corp oration h as n o c h o ic e in th e m atter?
S h areh old er in terests sh o u ld n o t b e m ea su red sim p ly in term s o f a ffe c tin g the
im m ed ia te in terests o f th o se w h o h ap p en to h o ld sh ares to d a y . A c tin g in th e b est
in terests o f sh areh old ers d o e s n o t a u to m a tic a lly m ea n d o in g n o th in g w h ic h c o u ld
ev e r a ffe c t th e sh are p rice i f so m e o n e w a n ted to s e ll sto c k s to d a y . A short-term
d e c lin e in p ro fita b ility d ue to corporate a ctio n tak en in th e p u b lic in terest (e g , a
p u b lic sa fe ty w a rn in g or p rod u ct re c a ll), w h eth er or n o t req u ired b y la w , m ig h t
b e fo llo w e d b y a lo n g -ter m in crea se in m arket share (e g , th rou gh co n su m er
support for a c o m p a n y w h ic h w ill n o t risk p u b lic sa fe ty an d w h o s e p ro d u cts are
b etter d e sig n e d as a resu lt). A short-term d iv e r sio n o f fu n d s or effo r ts to
in v e stig a te n e w w a y s o f se r v ic in g le s s p ro fita b le se c to rs (e g , lo w -in c o m e urban
areas or c o s t ly rural se r v ic e s) m ig h t resu lt in in n o v a tiv e se r v ic e d eliv ery ,
in c rea se d m arket share, co m m u n ity support, or oth er lo n g -term b en efits.
M o reo v er, i f so c ia l trust and so c ia l cap ital are im portant p rec o n d itio n s fo r th e
crea tio n an d m a x im isa tio n o f fin a n c ia l and e c o n o m ic c a p ita l," th is m ea n s that a
corp o ration h a s a stak e in crea tin g so c ie ta l co n d itio n s w h ic h m a x im ise its
u ltim a te su sta in a b ility and p ro fita b ility o n a lo n g -ter m v ie w . E v e n i f th ere are
sh ort-term c o sts and c o n se q u e n c e s fo r im m ed ia te p ro fita b ility and sh areh old er
d iv id en d s, th is m u st b e in th e b e s t in terests o f a corp o ra tio n and its sh areh old ers,
i f th e n o tio n o f ‘sh a reh o ld e rs’ for th is p u rp o se is n o t c o n fin e d to th e in d iv id u a ls
w h o h ap p en to h o ld sh ares at a particu lar p o in t in tim e and w h o m ig h t h a v e a
con trary self-in te r e st in n o t s e e in g a n yth in g d o n e w h ic h a ffe c ts th e short-term
p r ic e o f th eir sh ares. O f co u rse, all o f th is m u st b e tie d to o rg a n isa tio n a l and
in d iv id u a l g o v er n a n ce , p erform an ce, a c c o u n ta b ility and reporting. A g a in , th is is
w h y ‘trip le b o tto m lin e ’ a d v o ca te s lik e M ills fram e corporate g o v er n a n ce in
term s o f h o w th e o rg a n isa tio n e x p lo its o p p ortu n ities and m a n a g es risk s a risin g
fr o m th e co m b in e d e ffe c t o f e c o n o m ic , s o c ia l and en v iro n m en ta l factors in
d e liv e r in g su sta in a b le v a lu e for b o th sh areh old ers and sta k eh o ld e rs.99100
T h e in terests o f internal and extern al corp orate sta k eh o ld ers can b e part o f an
a sse ssm e n t o f corporate b e s t in terests, in w a y s w h ic h in teg ra te ‘trip le b o tto m
lin e ’ co n ce rn s. A t an org a n isa tio n a l le v e l, fo r ex a m p le, e m p lo y e e su rv ey s report
that e m p lo y e e s are m ore lik e ly to sta y w ith and w o r k fo r corp oration s w h ic h take
corp orate citiz e n sh ip se r io u sly . T h e im p a ct on e m p lo y e e m o ra le, p ro d u ctiv ity
and reten tion o b v io u s ly h as b e n e fic ia l e c o n o m ic c o n se q u e n c e s to o . A t an
99 Cox, above n 56.

100 M ills, above n 27.
in d u stry le v e l, th e in corp oration o f m e a su res co n c e r n in g corp orate c itiz en sh ip

and so c ia l r e sp o n sib ility in in v e stm e n t, risk and p erfo rm a n ce a sse ssm e n ts
in c rea se s th e p ressu re for in tegration o f th e sin g le and trip le b o tto m lin e s. A t a
so c ie ta l le v e l, th e d e v e lo p m e n t o f ‘trip le b o tto m lin e ’ m ea su res o f so c ia l
p ro g r e ss101 h as im p lic a tio n s for m ea su res o f a s s e s s in g corp orate ou tp uts and
d e c isio n -m a k in g as w e ll as co n c e p tu a lisa tio n o f w h a t co n stitu te corp orate and
sh areh old er b e st in terests.
T h e b e st in terests o f a corp oration and its m em b ers are m u lti-d im en sio n a l,
r e fle c tin g a v a riety o f e c o n o m ic and n o n -e c o n o m ic factors su ch a s m a in ta in in g
in d u stry stan d in g, a c c o m m o d a tin g b u sin e ss ‘b e s t p r a c tic e ’ g u id e lin e s and
e n h a n c in g a co rp o r a tio n ’s c o m m u n ity repu tation . ‘T rip le b o tto m lin e ’ m ea su res
are in c r e a sin g ly part o f th e se co m p o n e n ts to o and, in th is w id e r s e n se , are part o f
an a sse ssm e n t o f corporate b e st in terests.
In ad d ition , th e s in g le and trip le b o tto m lin e s m e e t at th e p o in t o f d e c id in g
w h eth er to in tern a lise or e x tern a lise th e c o s ts o f corporate a ctio n . C orporate
c o s ts can b e in tern a lised , as in th e in corp oratio n o f ‘trip le b o tto m lin e ’ m ea su res
in p erfo rm a n ce and co n fo r m a n ce criteria, or a ltern a tiv ely ex tern a lise d , as w h en
th e c o sts o f corporate a c tio n are b orn e b y e m p lo y e e s, cu sto m e rs and th e w id er
co m m u n ity . In so m e m arkets and regu latory d o m a in s, th e c o m b in a tio n o f lim ited
lia b ility o f c o m p a n ie s, a fin a n c ia lly -b a se d sh a reh o ld er fo c u s, n o n -im p o sitio n o f
‘trip le b o tto m lin e ’ m ea su res and sh ort-term sh are p rice m a x im isa tio n p ressu res
‘a llo w s th e corp oration to e x tern a lise th e c o sts o f m a x im isin g sto c k p rices o n to
ev e r y o n e e x c e p t th e stock h old ers; that in c lu d e s e m p lo y e e s, th e en v iro n m en t,
co n su m er s, su p p liers and th e co m m u n ity at la r g e ’.102
M a n y g o v er n a n ce p ro b lem s resu lt n o t from an tipathy to w a rd s ‘trip le b o tto m
lin e ’ th in k in g or failu re to u n d erstan d sh a reh o ld er v a lu e b u t rather, from
d e c isio n -m a k in g in short tim e-fra m es, w ith im p erfect in fo rm a tio n , w ith
in ad eq u ate fram ew ork s for b a la n cin g and in teg ra tin g sin g le and trip le b o tto m
lin e s ,103 and w ith h um an d y n a m ic s in p ra ctice w h ic h o p erate in te n sio n w ith
‘g o o d g o v e r n a n c e ’ th in k in g (e g , N R M A -s ty le b oard w arfare, H IH -sty le
in ad eq u ate d ue d ilig e n c e , E n ro n -sty le m arket m isin fo rm a tio n , etc ). W h a tev e r th e
d e fic ie n c ie s in ‘trip le b o tto m lin e ’ a n a ly sis, it fo c u s e s atten tio n o n a w id e r and
m o re h o lis tic fo r m o f d e c isio n -m a k in g than th e n a rro w est fin a n c ia l c o n c e p tio n s
o f ‘th e b o tto m lin e ’.
F in a lly , th e o rth o d o x fin a n c ia l fo c u s o f standard rep ortin g, d isc lo sin g ,
au d itin g, a c c o u n tin g and v a lu in g standards is b e in g b ro a d en ed n a tio n a lly and
in tern a tio n a lly to em b race ‘trip le b o tto m lin e ’ m e a su res, so that p erfo rm a n ce and
co n fo r m a n ce is tie d to th e m .104 In that w a y , th e d im e n sio n s o n w h ic h d e c is io n s
101 For example, the Human Development Index adopted by the United Nations as a measure o f social and
economic progress, and the Genuine Progress Indicator (GPI) developed by the Australia Institute to
measure social well-being in terms beyond Gross Dom estic Product (GDP).
102 Roundtable, above n 60.
103 See generally, ibid.
104 For example, the D ow Jones Sustainability Index, the Westpac-Monash Eco Index, the Good Reputation
Index, the Australia Institute’s Genuine Progress Indicator (c f GDP indicator), Amnesty International’s
Just Business human rights framework for corporate compliance (above n 68) and innovations like ss
2 9 9 (l)(f) and 1013 d ( 1)(1) o f the Corporations Act 2001 (Cth).
ab ou t a co rp o ra tio n ’s b e st in terests are a s s e s s e d in c lu d e th in g s w h ic h integrate

‘trip le b o tto m lin e ’ co n ce rn s w ith in that a sse ssm e n t, in w a y s w h ic h m a tch the
d im e n sio n s o f corp orate and o rg a n isa tio n a l gov ern a n ce.
VIII CONCLUSION
In today’s world, where ideas are increasingly displacing the physical in the
production of economic value, competition for reputation becomes a significant
driving force, propelling our economy.
—Alan Greenspan, Chairman o f the United States Federal Reserve .105
Some of Australia’s top firms still think a commitment to the environment means
turning the office lights off at night and putting a recycling bin next to the
photocopier. None of Australia’s leading 100 companies has a clean environmental
slate.
—Journalist Matt Woode, commenting on the environmental performance component o f the
corporate Good Reputation Index .106
B a ttles o v er truth and v a lu e s h a v e a con tem p ora ry im p a ct u p o n g o v ern m en ts

and co rp oration s a lik e. G reater sc e p tic is m ab ou t o b je c tiv ity and truth lea d s to
w id esp rea d sc e p tic ism ab out th e fu n dam en tal rig h tn ess or co rrectn ess o f
particu lar p o litic a l and le g a l fram ew ork s, as w e ll as w id esp rea d d isillu sio n m e n t
w ith th e p ra ctic e and resu lts o f th e p o litic a l and le g a l sy stem s. B o th o f th e se su b
d ev e lo p m e n ts flo w th rou gh to th e p op u lar d istru st o f th e m o tiv e s, rh etoric and
a ctio n s o f corp oration s. C o m p etitio n b e tw e e n con tractarian and n o n -
con tractarian th eo r ie s o f corp oration s and th eir p la c e in th e w o r ld c o m b in e w ith
th e im p act o f g lo b a lisa tio n and its k e y featu res o f th e in tern a tio n a lisa tio n o f
d o m e stic la w and p o lic y , th e in tern a tio n a lisa tio n o f b u sin e ss reg u la tio n , the
m o v e m e n t tow ard s corporate so c ia l r e sp o n sib ility and th e rise o f rig h ts-b a sed
litig a tio n for or a g a in st corp oration s to create extern al and internal p ressu res
u p o n corp oration s.
In an im p ortan t s e n se , th e rela tio n sh ip b e tw e e n corp oration s and co m m u n ities
is sim p ly o n e b attlegrou n d for th e w id e r w a r w ith in s o c ie t y in th e sh ift o f
le g itim a c y , so v e r e ig n ty and p o w e r b e tw e e n in d iv id u a ls and grou p s o f v a rio u s
k in d s. T hat w ar is r e fle c te d in la w as m u ch a s in th e th eo r ie s and rh etoric o f
corporate g o v er n a n ce . In la w , fo r ex a m p le, d ev elo p m en ts in v a rio u s d epartm ents
o f la w p ro m o te co n ce rn for o th er’s in terests in a d d itio n to ration al se lf-in te rest
and in c r e a sin g ly in c lu d e r e fer en ces to o p e n -en d ed and g e n e r a lise d standards o f
105 Leon Gettler, ‘What’s a Reputation Worth?’, Sydney Morning Herald (Sydney), 22 October 2001, 2.
106 Matt Woode, ‘Lip Service Costing the Earth’, Sydney Morning Herald (Sydney), 22 October 2001, 10.
co n d u c t w h ic h are n o t c o n fin e d to rea so n a b le se lf-in te r e st.107 T h is is m a tch ed o n

a w id e r le v e l b y a n e w ly em erg en t c o n v e r g e n c e p o in t fo r b u sin e ss eth ics,
g o v ern m en t regu lation , corporate g o v er n a n ce and n o tio n s o f a c iv il s o c ie ty
w h ic h p ro m o tes en h a n c ed co n ce rn for in d iv id u a ls and grou p s a ffe c te d b y
in stitu tio n a l b eh a v io u r b oth w ith in and o u tsid e p o litic a l in stitu tio n s and
o rg a n isa tio n s. T h is is n o t an eso te r ic o b serv a tio n . It cr itic a lly structures and
a ffe c ts th e m in d se ts and d e c isio n -m a k in g fram ew ork s o f corp orate a ctors as w e ll
as a n y proper refo rm or critiq u e o f th em fo r regu latory, b u sin e ss, or p u b lic
p u rp oses.
A ll o f th e se th in g s are part o f an im portant c la im — n a m ely , that the
cu m u la tiv e e f fe c t o f the e v o lu tio n o f p h ilo so p h ic a l, h isto rica l, s o c ia l, le g a l and
e c o n o m ic p e r sp e c tiv e s o n corp oration s is p ro d u cin g r e n e w e d em p h a sis at a
n um ber o f p o in ts u p o n in d iv id u a l-ce n tred co n ce rn s and th e e le v a te d w e ig h tin g o f
th o se co n ce rn s, w h eth er it b e in term s o f in d iv id u a lise d co n ce rn s w ith in
fram ew ork s o f corporate g o v er n a n ce , th e o b je c ts o f le g a l reg u la tio n , p ro m o tio n
o f corp orate c itiz e n sh ip , m o d era tio n o f u n fair b u sin e ss co n d u c t to w a rd s oth ers,
or corp orate p r o te ctio n o f a v a riety o f h um an righ ts in tern a lly and ex tern a lly .
S trip ped o f th eir rh etorical fo r ce, su ch attem p ts at reco n fig u r a tio n o f corporate
attitud es and p ra ctic es re p o sitio n th e in d iv id u a l as a fo c a l p o in t fo r reg u la to ry
re sp o n se s, corp orate structures and a c tiv itie s, e m p lo y m e n t p ra ctic es, internal and
ex tern al corp orate d e a lin g s an d corporate in tera ctio n s w ith in so c ie ty .
T h e su p e rficia l te n sio n or d ic h o to m y b e tw e e n p ro fita b le co m m er cia l
in tera ctio n s and u n p rofitab le c o m m u n ity in tera ctio n s starts to d is s o lv e o n c e
corporate citiz e n sh ip and corp orate p h ilan th ro p y are n o lo n g e r v ie w e d in term s
o f a ‘o n e -w a y str eet’, b ut in term s o f m u tu al a d van tage, ex p a n d e d op p o rtu n ities
and ‘g r o w in g th e p ie ’:
The American experience has shown philanthropy to be a two-way street. As
businesses get to know poor communities, they more efficiently meet the needs of
low-income consumers. As firms help to lower the rate of unemployment, they
increase the rate of consumption for their products.
Most importantly, corporations can use hands-on projects to develop the skills of
their staff. Businesses today need lateral thinkers and problem solvers. They need
managers who can think on their feet and rapidly adapt to new challenges. If a
company’s staff can resolve issues in disadvantaged areas, they are more likely to
bring the skills of problem solving and creativity to their regular work.
As the Harvard management expert Rosabeth Moss Kanter argues:
Tackling social sector problems forces companies to stretch their
capacities to produce innovations that have business as well as
community pay-offs. When companies approach social needs in this
way, they have a stake in the problems. They use their best people and
107 See, eg, Paul Finn, ‘Commerce, the Common Law and Morality’ (1989) 17 Melbourne University Law
Review 87; Paul Finn, ‘O f Power and the People: Ends and Methods in Australian Judge-Made Law’
(1994) 1 The Judicial Review 255. See also the wider developments in business regulation canvassed in
Bryan Horrigan, ‘Unconscionability Breaks N ew Ground — Avoiding and Litigating Unfair Client
Conduct After the ACCC Test Cases and Financial Services Reforms’ (2002) 7 Deakin Law Review 73.
their core skills. This is not charity; it is R & D — a strategic business

investment.108
Y o u can d isa g r ee w ith L ath am and K anter h ere and d ou b t th e s u ffic ie n c y o f
th is in c e n tiv e for m u ch corporate con d u ct, and y e t still a cc ep t that th e
re la tio n sh ip s b e tw e e n s o c ia l an d fin a n c ia l cap ital, and b e tw e e n co rp o ra tio n s and
th eir co n su m ers and c o m m u n ities, are su ch that m o n o -d im e n sio n a l fra m in g o f
corp orate an d sh areh old er in terests in th e fin a n cia l term s o f ‘w h a t’s in it fo r u s ? ’
is eith er to o n arrow a rep resen tation o f reality or e ls e so m e th in g w h ic h ca n it s e lf
a cc o m m o d a te b o th p ro fita b ility and c iv ic -m in d e d n e ss in co m m e r c ia lly
in n o v a tiv e w a y s.
O f co u rse , n o p ro g ress in corp orate s o c ia l r e sp o n sib ility can h a p p en in
iso la tio n . A t in tern ation al, gov ern m en ta l, o rg a n isa tio n a l and in d iv id u a l le v e ls ,
there n e e d s to b e a p r o g r e ssiv e ad o p tio n and th en tra n sla tio n o f ‘trip le b o tto m
lin e ’ m e a su res into m e a n in g fu l stra teg ies an d g u id e lin e s. In th is w a y , a
c o n n e c tio n is m a d e b e tw e e n s o c ia l w e ll-b e in g , reg u la to ry standards,
o rg a n isa tio n a l p erfo rm a n ce and in d iv id u a l w o r k p la ce a c tiv itie s. S o m e s p e c ific
su g g e stio n s and a c tio n s are d e ta ile d in D ia g ra m 2 at th e en d o f th is article.
W e can c h o o s e to v ie w corp orate s o c ia l re sp o n sib ility and trip le b o tto m lin e s
a s p a ssin g fa d s w h ic h detract from th e ‘r e a l’ b o tto m lin e . W e ca n a lso c h o o s e to
v ie w th em as a n e w turning p o in t in b etter e x p o s in g th e rela tio n b e tw e e n the
co n n e c te d in terests o f corp oration s, th eir sh areh old ers, th eir sta k eh o ld ers and
oth ers. A fte r E nron, W o rld .C o m , H IH and O n e .T e l, narrow c o n c e p tio n s o f
corporate g o v er n a n ce are m o re lik e ly to g iv e w a y to w id er n o tio n s w h ic h are
m o r e r e sp o n siv e to so c ie ta l n e e d s o n a ran ge o f le v e ls . W h at rem a in s co n te n tio u s
is w h eth er corp orate g o v er n a n ce reform s sh ou ld b e lim ite d to m a in strea m is s u e s
o f corporate au d itin g, rep ortin g and d isc lo su re , or w h eth er th e y can e x ten d a lso
to w id e r is s u e s su rrou n din g th e c o n n e c tio n b e tw e e n g o v er n a n ce , e th ics and
s o c ia l r e sp o n sib ility . A fte r th e C L E R P 9 d eb ate o n corporate d isc lo su r e and
au dit regu lation , m ig h t w e dare h o p e fo r a C L E R P 10 o n corporate s o c ia l
r e sp o n sib ility ?
108 Mark Latham, ‘PM ’s Charity Model a Step Back in Time’, Australian Financial Review (Sydney), 15
M ay 2000, 25.
D IA G R A M 1: M ID D L E M A N A G E R ’S ‘N E W G O V E R N A N C E ’ D E C IS IO N
M A K IN G P E R S P E C T IV E
futeniJ OptfKiktfM?
1
Luutud'Strtftsii trivimmnuutal f-actoib
D IA G R A M 2
T H E ‘T R IP L E B O T T O M L I N E ’ ( ‘T B L ’) a n d C O R P O R A T E S O C I A L R E S P O N S IB IL I T Y ( ‘C S R ’) -
A L IG N M E N T , R E S P O N S IB IL I T Y A N D I N D I C A T O R S
International Governmental Organisational Individual
• Cross-national socio • Transforming corporate • Charitable donations • Pro bono work

economic regulation regulatory ideology • Community sponsorships • Work assignments
and standard-setting • Legislating duties to • TBL/CSR awareness- and secondments
for governments, stakeholders as well as raising programs • Ethical leadership
MNCs and NGOs shareholders, or • Pro bono work • Suggested meeting
• Cross-national otherwise improving • Staff and community agenda items
regulatory agency stakeholder input into secondments • Contribution to
guidelines and support corporate governance • Culture shift from SBL to organisational
for TBL/CSR • Developing national TBL/CSR policies and plans
• Human rights socioeconomic indicators • Human rights • Negotiated
conditions in beyond GDP management and individual
international • Developing national socioeconomic plans as performance
agreements socioeconomic standards w ell as financial and measures
• Cross-national socio beyond strategic plans • Cultural change
economic progress, accounting/auditing • Socioeconomic agent
prosperity, and • Including socioeconomic organisational • Individual career
community well-being tender and audit criteria performance measures plans
indicators • Including socioeconomic • Socioeconomic internal • Contribution as
• Socioeconomic outsourcing performance and external reporting (eg employee,
measures in “best conditions in annual reports, or shareholders, or
practice” governance • Creating regulatory special social impact stakeholder to
guides and codes carrots/sticks for ethical reports) organisation
• Funding tied to investment and TBL/CSR • Stakeholder inputs and planning, reporting,
TBL/CSR indicators governance representation in and governance
• Coordinating network • Empowering regulatory planning, reporting, and using TBL/CSR
for disseminating agencies to act in governance performance
TBL/CSR knowledge stakeholders’ interests . Other TBL/CSR measures
to national • Institutionalising governance inputs and
governments, agencies, community and measures
NGOs, and MNCs stakeholder relationships • Contributions to industry
• Promotion o f ethical and inputs in policy reviews o f unethical
investment and making and law-making business practices and
TBL/CSR governance bad governance
• Reframing “shareholder
interests”
• Community impact audits
beyond customer surveys
• Socioeconomic project
audits
• Community R & D
• TBL/CSR compliance
• TBL/CSR Board and
meeting agenda items
• Internal ethical audit
• Aligning organisational
TBL/CSR measures and
individual performance,
pay, and promotion

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2002 Corporate Governance and Social Responsibility 515

FAULT LINES IN THE INTERSECTION BETWEEN

Good corporate citizenship is good business practice.

D o co m p a n ies h a v e s o c ia l c o n s c ie n c e s or is that treatin g th em w r o n g ly , as

in a d eq u ate to m e e t th e c o m p le x itie s o f coxporate re g u la tio n and g o v er n a n ce . T h e

rh etorical b a ttles fram ed in sim p le term s o f a pure d ic h o to m y or co m p e titio n

II GLOBAL AND IDEOLOGICAL DEBATES

B o th th e g lo b a l la n d sca p e and th e corporate m in d se t are c h a n g in g from

c o m p a n ie s m a in ly in term s o f m a x im isin g p ro fits and sh a reh o ld er returns rather

I ll LINKING SOCIOECONOMIC INTERESTS TO CORPORATE

N e ith e r o rg a n isa tio n s n or in d iv id u a ls are lik e ly to tak e corp orate so c ia l

in a n y w id e r se n se o f r e sp o n sib ility to sta k eh o ld e rs.23 O f co u rse, th ere is a lso a

(5 ) P erform an ce g o v er n a n ce , b o th o r g a n isa tio n a lly and in d iv id u a lly ,

o rg a n isa tio n a l g o v er n a n ce w h ic h em p h a sise s th e lin k a g es b e tw e e n its v a rio u s

g o v er n a n ce c o n ce rn s as d istin ct in terests w o r th y o f in c lu sio n in ‘b o tto m lin e ’

re la tio n sh ip s as c o o p e r a tiv e o n e s c a llin g fo r o th er-regard in g b e h a v io u r ’, thus

36 Bradley et al, above n 22, 11.

m u st a lso a cc o u n t for th e im p lic a tio n s o f b ad g o v er n a n ce . It m ig h t b e clearer

IV IMPLICATIONS FOR CORPORATE REGULATION AND

O n e o f th e n a g g in g is s u e s in corp orate reg u la tio n c o n ce rn s th e ex ten t to w h ic h

38 See Cole, above n 26; Knott, above n 21.

in te r e sts’ an d sh a reh o ld er/sta k eh o ld er a cc o u n ta b ility rather than a n a ly sis at an y

41 (200 0 )2 0 1 CLR 603.

p o in ts o f b o th in stitu tio n a l le v e r a g e (e g , im p o sitio n o f corporate rep o rtin g and

Of course, there are many complexities here as well as theoretical tensions

V BU SINESS E TH IC S, CO RPO R A TE C IT IZ EN SH IP AN D THE

Can anybody nominate one director or business professional who, in their

Here, the supposed neutrality of the market, enshrined in the common

symbiotic relationship between these three strands, strategically interwoven,

this damage to a corporation’s political capital, public capital and consumer

—Mike Nahan, Executive Director of the Institute of Public Affairs.59

—Reverend Robert Sirico.60

Much of this discussion occurs within an ideological map which positions

Thus, positing a linear or bi-polar relation between two notional ‘shareholder’

64 Ibid 732, 740.

72 Financial Management and Accountability Act 1997 (Cth) s 44.

and sustains long-term shareholder value by both embracing opportunities and

77 M ills, above n 27.

What are the elements of community-sensitive corporate regulation and

79 Additional suggestions appear in Diagram 2 at the end o f this article.

—Australian Shareholders’ Association.87

—Economist Ian McAuley, advocating an expansive notion of economics to replace the

E c o n o m ist Ian M c A u le y c o m m en ts o n th e te n sio n b e tw e e n th e se d ifferen t

93 McAuley, above n 88.

o rg a n isa tio n a l and in d iv id u a l p erform an ce in d icato rs. N e w ly in tro d u ced in 1 9 9 9 ,

In ad d ition , p u b lic se c to r e n titie s h a v e rela tio n sh ip s w ith sta k eh o ld ers w h ic h are

99 Cox, above n 56.

in d u stry le v e l, th e in corp oration o f m e a su res co n c e r n in g corp orate c itiz en sh ip

ab ou t a co rp o ra tio n ’s b e st in terests are a s s e s s e d in c lu d e th in g s w h ic h integrate

B a ttles o v er truth and v a lu e s h a v e a con tem p ora ry im p a ct u p o n g o v ern m en ts

co n d u c t w h ic h are n o t c o n fin e d to rea so n a b le se lf-in te r e st.107 T h is is m a tch ed o n

their core skills. This is not charity; it is R & D — a strategic business

International Governmental Organisational Individual

• Cross-national socio­ • Transforming corporate • Charitable donations • Pro bono work

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• Cross-national socio • Transforming corporate • Charitable donations • Pro bono work