Why shareholder primacy persists in policy
A recent UK government consultation on corporate reporting reveals a continued prioritisation of shareholder interests over broader social responsibilities, despite growing calls for reform. The process, launched amid rising concerns about inequality and corporate power, seeks to update rules on how large companies disclose their environmental, social and governance impacts. Critics argue the proposals fall short of meaningful change, instead reinforcing a framework that treats profit maximisation as the primary duty of business.
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Israel and Lebanon to Hold Security Talks in Rome This OctoberThe consultation builds on decades of influence from neoliberal economic thought, particularly the ideas of Milton Friedman, who famously asserted in 1970 that a business’s sole social responsibility is to increase its profits. Friedman dismissed concerns about fair wages or community impact as „pure and unadulterated socialism,” a view that has long shaped corporate governance in Britain and beyond. Today’s reform efforts, while acknowledging stakeholder interests in name, stop short of challenging this core principle, leaving accountability mechanisms weak and voluntary.
Can disclosure alone change corporate behaviour?
Despite rhetoric about responsible capitalism, the government’s approach avoids binding requirements on companies to consider workers, communities or the environment in decision-making. Instead, it relies on enhanced disclosure, assuming transparency alone will drive better behaviour. This reflects a deeper reluctance to challenge the legal doctrine that directors owe their primary duty to shareholders, a rule embedded in the Companies Act 2006. Trade unions and civil society groups warn that without legal reform, reporting exercises will remain box-ticking exercises, easily sidestepped when profits are at stake.
The consultation proposes expanded reporting on climate risks, diversity and executive pay, but lacks enforcement teeth. Experts point to the limited impact of similar regimes elsewhere, where companies comply minimally while continuing harmful practices. Real change, they argue, requires shifting legal fiduciary duties to include stakeholders and giving workers a formal voice in boardrooms. Until then, the state risks managing the symptoms of corporate excess while leaving its root causes untouched.
What does the government’s consultation actually propose? It calls for larger companies to report more detail on environmental, social and governance matters, but does not make such considerations legally binding in decision-making.
Frequently Asked Questions
Why do critics say this entrenches neoliberalism? Because it maintains the idea that profit for shareholders comes first, treating social and environmental concerns as optional add-ons rather than core obligations.
Is there support for changing directors’ legal duties? Yes, from trade unions, some MPs and advocacy groups, who argue company law must be reformed to require fair treatment of workers and communities alongside profit.
