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Past Issue • Jan-Mar 2014

An Upheaval in Corporate Purpose

Safeguarding the interests of all stakeholders is the rousing call to arms of the new Companies Act, but will mere changes to the corporate governance codes achieve this objective? Nawshir Mirza fuels the debate on the new company law with some hard-hitting questions: How exactly are firms to balance the interests of all their stakeholders and achieve compliance, when no measure of value exists for certain stakeholder groups? Will new thinking bring about a radical shift in the purpose of the firm?

In his 1962 book, “Capitalism and Freedom,” University of Chicago professor and Nobel prize-winning economist, Milton Friedman, famously declared, “Few trends could so thoroughly undermine the 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.” Friedman’s book went on to have a profound influence on businesses in America and many other countries that professed the capitalist creed. The belief that maximising shareholder value was the sole purpose of all corporate existence was given strong impetus with its endorsement by so eminent an economist.

ABOUT THE AUTHORS

  • Nawashir-Mirza

    Nawshir Mirza

    Fellow of the Institute of Chartered Accountants of India, Independent director on the boards of several companies and a thinker on corporate governance issues.
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