In her book, The Shareholder Value Myth, How Putting Shareholders First Harms Investors, Corporations and the Public, the late Lynn Stout questioned the need for a new corporate form to address shareholder primacy. “There is no solid legal support for the claim that directors and executives of US public corporations have an enforceable legal duty to maximise shareholder wealth,” wrote Stout, a Cornell University professor and corporate law scholar. “The idea is fable.”

Strine, the former judge, sits on the other side of this legal argument. He believes that alternative statutes give more power to corporations that want to “do the right thing”. And while he concedes that traditional corporate law allows boards to consider the interests of other constituencies, such as communities and workers, he says its language gives them no enforcement rights. “The stockholders remain the sole constituency with power.”

Strine says PBC requirements represent a subtle but important shift from “may” to “shall” in shareholder governance. “’May’ is optional,” he says. “If I have a ‘shall’ duty towards the employees and the community, that’s different for me as a fiduciary, and that’s what happens in the PBC.” Corporate lawyers will no doubt continue the debate, yet which argument wins is perhaps less important than what new corporate forms will do to shift the culture of business. Even if those who share Stout’s views are technically correct, the mantra of shareholder primacy is, as emerged in our first article in this series, proving tough to dislodge.

For this reason, Kassoy believes much of the power in stakeholder governance lies in the signals it sends. “There’s lots of arguments by scholars as to whether the law actually says that [directors’ duty is to maximise shareholder value] or whether it’s interpreted that way,” he says. “But at some level it doesn’t matter — what matters is what the culture in the boardroom is as a result.”

Rick Alexander, who founded the Shareholder Commons, agrees. “It does make a statement and it does instil this idea that the world doesn’t revolve around financial returns,” says Alexander, whose US non-profit promotes responsible corporate ownership. “It is important in beginning to have participants in the market expressly stand behind these ideas.”

To enlist more participants, the Shareholder Commons uses shareholder resolutions to press companies into embracing stakeholder governance. This year, for example, it helped shareholders at companies including Chevron, Fox, Goldman Sachs and JPMorgan Chase put forward proposals to address the increasing use of “dual” (or multi) class share structures, which give disproportionate voting rights to corporate leaders and founders.

None of those votes have attracted more than 3 per cent support, and some of the boards it has targeted have warned that such a change could expose them to more shareholder litigation. But the Shareholder Commons is not alone. Activists such as John Harrington of Harrington Investments and Natasha Lamb of Arjuna Capital have used similar tactics to push banks and tech companies into adjusting their articles of incorporation. So far, pressure from these activists has succeeded only in raising awareness. “But this was the first year,” says Alexander.

In the meantime, should governments make it mandatory for companies to incorporate in this way? When we posed this question to Moral Money readers, the response was mixed but, surprisingly, the larger group favoured regulation.

George Dallas believes that the regulatory approach faces hurdles. Dallas, the policy director at the International Corporate Governance Network, argues that before introducing such a requirement, governments would need to demonstrate that long-term, sustainable approaches to business necessitated a change in corporate structure.

“Any significant change of law should be supported with clear evidence,” he says. “And there would be a substantial burden of proof on anyone claiming that government should promote better social outcomes by requiring benefit corporations. That would face a lot of scrutiny.”

Even without government regulation, pressure for companies to enshrine their values in their corporate structure is likely to come from one group of constituents in particular: their employees.

A large number of Moral Money readers said that their stakeholder-focused structure or B Corp certification had helped them to engage and retain staff and attract new talent. Marquis confirms this phenomenon. “Many companies I’ve talked to have said that in the past few years people who apply to work for them often do so because they’re a B Corp,” he says.

While few large companies used to worry about the nature of their articles of incorporation, interest in stakeholder governance is starting to take hold, including in the public markets.

However, Mac Cormac of Morrison & Foerster believes real change will come when corporations that are not the usual suspects make the move. “This needs to be picked up by the dirty companies,” she says. “It’s not been used for that yet but I want it to be.”

Webb of AppHarvest goes further. “When people say they will make these commitments but they’re not going to actually structure the company differently in any way, it’s very hollow,” he says.

Dallas warns that the focus on alternative structures should not let traditional companies off the hook when it comes to pursuing sustainable strategies. “It is hard to disagree that a benefit corporation is an entity whose structure will, if successful, generate positive social and economic outcomes — but that need not be the only way those outcomes can occur.”

Nor do alternative structures provide the only tools needed to advance stakeholder capitalism. As our second article in this series concluded, the ability to shift capital in a more sustainable direction will rest heavily on robust and standardised impact measurement and reporting.

But while Strine, the former Delaware judge, warns against seeing stakeholder governance as a silver bullet to reform capitalism, he believes it will make an important contribution. “You don’t want to oversell it, and I don’t,” he says.

“But if you turn a series of knobs in the right direction, you can make some real change.” In some ways, particularly in the US, the rise of shareholder governance may simply allow businesses to return to the way they operated before shareholder primacy took hold in the 1970s. “It’s not a wild overcorrection,” says Zwillinger. “It’s just swinging it back to the way it was.”