The court agreed with the brothers Dodge and declared that Ford couldn’t raise the wages of the company’s workers or lower the price of its cars. 

“A business corporation is organised and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.”

Dodge vs Ford Motor Co is a textbook case of what’s known as shareholder primacy – the idea that profits trumps all else.

Labour MP Duncan Webb has a private members bill currently before parliament that if passed will end that idea for good.

Webb says the Companies (Directors Duties) Amendment Bill enables companies to have social or environmental objectives rather than just profit.

“It's a signal that stakeholders are relevant to corporate governance and that the best interests of the company can, in fact, be to promote the interests of others.”

So, could the climate itself potentially be a stakeholder in a company?

“As currently drafted I see no difficulty in a company choosing to pursue a purpose of enhancing climate outcomes and recognising that part of the environment as an important stakeholder in the company’s activities (after all in New Zealand we have been world leading in recognising that parts of the environment can have legal personality and protections).” Webb told Carbon News.

How is that different from a company committing to a carbon zero target?

Such a target “may be simply to meet regulatory standards, or to meet community expectations (or even shareholder demands. This bill recognises that a company can develops goals and objectives (set by founders, shareholders and directors) which are ends in themselves. They can include things such as enhancing climate outcomes,” Webb said.

“It's a signal that stakeholders are relevant to corporate governance and that the best interests of the company can, in fact, be to promote the interests of others.”

"Socialist stakeholder capitalism"

Both National and Act said they would oppose the bill during the bill’s reading earlier this month.

ACT Party MP Damien Smith declared the bill “a war on business enlightenment.”

“The system is not broken, so why would you try to fix it?” Smith asked.

He said the bill was another example of Labour’s campaign for “socialist stakeholder capitalism”

“ESG advocates are trying to return this country to a world of darkness.”

National MP Andrew Bayly said businesses already did their best by their employees and their ESG responsibilities because if they didn’t they wouldn’t be able to attract capital.

“If we move away from the prime objectives of business to make money, to make profit then that is an issue because otherwise we’re just going to have a whole lot of companies fail.”

The amendment being sought is very short, and reads in its entirety:

To avoid doubt, a director of a company may, when determining the best interests of the company, take into account recognised environmental, social and governance factors, such as:

(a) recognising the principles of the Treaty of Waitangi (Te Tiriti o Waitangi):

(b) reducing adverse environmental impacts:

(c) upholding high standards of ethical behaviour:

(d) following fair and equitable employment practices:

(e) recognising the interests of the wider community.

The bill passed its first reading on November 9 and will now be considered by the Economic Development Science and Innovation Select Committee.

(First published 22 November.)