Changing the Corporation to Safeguard the Public Interest

Photo by Richard Miller

19 July 2025

The purpose of the corporation is to make money, not maximize profits. I was a corporate lawyer for more than thirty years advising boards of many large corporations. None talked about maximising profits. They talked about return on investment and making earnings forecasts. None sat down to figure out how to squeeze the last dollar out of their businesses to maximise profit.

The corporation's purpose is closely aligned with the corporate law duty of directors which calls for directors "to act in the company's (and sometimes shareholders') best interests." Basically, that translates to preserving company assets and enhancing shareholder value (not maximising profits).

It must be admitted, however, that this duty can cause companies to continue causing severe harm to the environment and other elements of the public interest (e.g. human rights, the public health and safety, the dignity of employees and the wellbeing of the communities in which the company operates). Here's the way it happens.

Companies start a business. It becomes successful and then much later advances in science or something else makes everyone recognise the business, even though it’s legal, is inflicting severe harm on the environment, a class of individuals or the community in which it operates.  This comes to the directors’ attention and now they have to make a decision whether to continue the business in spite of the harm or eliminate the harm either by changing the way the business operates or closing it down altogether. 

They address this decision like they do all decisions.  They try to determine what’s in the company’s best interests?  The business is not illegal.  It’s making lots of money and is worth billions.  If they stop it, they will have to write-off their investment and find something to replace the business’s earnings.  Finding something to replace it may involve risky investment in expensive research and development with no guarantee of success.  Stopping it will involve not only writing off of the investment, but probably a loss of jobs and harm to the local economy.

There is little or no possibility that stopping or changing the business in these circumstances would be considered in the company’s best interests. The directors do what they can to continue the business, including first denying there is a problem and then by lobbying politicians and sometimes misleading the public to keep new legislation from being passed which would protect the public interest by making them stop. 

We’ve seen this many times regarding:

·       the emission of greenhouse gases;

·       serious health problems from mass manufactured and distributed, addictive, carcinogenic products,

·       the use of third world sweatshops,

·       grossly unfair labour practices and

·       the business models of social media companies which profit from algorithms designed to build conflict and tear communities apart. 

It’s pretty clear that artificial intelligence will probably proceed along a similar path if something isn’t done first to prevent it.

At one time, all these things were businesses that no one thought was causing much harm.  The behaviour remained legal.  The companies grew.  It was only later when the extent of the harm became apparent that people started to think about making it stop.  It was only in the last few decades that it became clear that, in many cases, government is unable to stop to the destruction because the businesses causing it interfere in the legislative process.

So, where we are now is that

·       corporations have the capacity to cause great harm,

·       the law encourages them to continue when they are found out and

·       the companies causing the most severe harm are able to prevent the government from passing laws to make the destruction stop.

I’ve been suggesting for a long time that the way to change this is to change the purpose corporations by changing the duty of their directors.  Imposing limitations on directors’ duty to act in the company’s self-interest is possible.  Indeed, the unrestrained duty to act in the company’s interests has only been the law since the late 1800s.  Before that, they were at least some restraints on corporate anti-social behaviour in place. 

No one wants companies to knowingly inflict severe harm and government not be able to make it stop. The solution is to make it the law that they shouldn’t.   Change the nature of the corporation from the pursuit of unbridled self-interest to one that has a safety switch which turns off the harm once it becomes known.  The people responsible for throwing that switch should be the company’s directors. 

This can be achieved by changing the corporate programming (i.e., the corporate law).  Change the duty of directors from merely “acting in the company’s best interests” to “acting in the best interests of the company, but not at the expense of severe damage to the environment, human rights, the public health and safety, the dignity of employees or the wellbeing of the communities in which the company operates.” 

This change, which I call the Code for Corporate Citizenship, will make directors change their allegiances when it becomes known their company is severely harming the public interest. At that time, their priority shifts from acting in the company’s best interests to protecting the public interest from severe harm.  This would happen similarly to the way it now shifts to creditors when a company becomes bankrupt. 

The Code will make examples out of the companies which are now causing severe damage (by making them stop).   This will serve as a warning for all other corporations (and their directors) that the rules have changed.  Corporate inflicted severe harm will no longer be tolerated as normal and acceptable corporate behaviour. 

The Code will change the mindset of directors, officers, senior managers, employees, customers investors, public officials and the public about the way profits are to be achieved. Those on inside will understand, if they don’t respect the Code, they could lose their company.

For everyone inside the corporation, their job will include monitoring the business to make sure that the business isn’t causing severe harm and is not headed in that direction. No doubt they will receive help identifying these risks from various public interest groups as well. 

Monitoring will allow directors to recognize problems early, before too much money is invested, and take steps to mitigate the risk the company might have to stop the business later.  Such monitoring and risk management should eliminate most potential severe damage before it arises. 

How to make money without harming the public interest will become a regular feature of all board deliberations.  Managing the risk will become everyone’s job.  As focus is brought to not just making money, but protecting the public interest as well, corporate anti-social behaviour should drop and corporations should become much better citizens.