Corporate Sustainability and Profit Maximisation in the Land of Unicorns

Abstract

Promotion of sustainability is a key issue for political and corporate leaders as well as for society at large. Attention has turned to the question of the corporate purpose and a number of prominent scholars have argued that companies should adopt a broad, stakeholder-oriented purpose in order to promote corporate sustainability. Against the background of the statutory profit maximisation purpose set out in the Swedish Companies Act this article contributes to the ongoing debate by discussing the successful reconciliation of both high sustainability and shareholder centricity in Sweden. Sweden has the second largest concentration of billion-dollar companies per capita in the world while simultaneously ranking in the very top of global sustainability league tables. Consequently, the Swedish setting can offer valuable observations and insights for scholars, practitioners and politicians alike. The article critically examines, inter alia, the problem of short-termism, the main corporate governance theories, the specific features of the Swedish corporate governance system, the interpretation and application of the Swedish profit maximisation purpose and corporate sustainability from a Swedish perspective. The study indicates (i) that the profit maximisation purpose in the Swedish Companies Act is fully compatible with the promotion of corporate sustainability, and (ii) that the corporate purpose forms part of and should be consistent with inter alia the relevant corporate governance system in order to be effective. Another important finding is that there are in general quite strong arguments for a model like the Swedish one, where the stakeholders are provided with strong protection primarily through statutory rules and where the directors are bound to protect and work for the long-term shareholder value. As the corporate purpose can only be understood when viewed through the lens of a particular legal framework, caution should however be taken with respect to legal transplants. Any convergence in the field of corporate governance must consider factors such as the structure of corporate governance system, the shareholder-structure, the enforcement rules and the political economy.