Nobuko Matsumoto: For-Profit Corporations and the Realization of Public Interest Purposes

2025/01/27

In recent years, expectations have been growing for the role that for-profit corporations should play in realizing public interest purposes. The statement released in 2019 by the Business Roundtable, a US business association, drew significant attention by omitting the traditional view that a company exists primarily to serve its shareholders and instead mentioning a "commitment to all stakeholders."

In this connection, you may have heard the term "social enterprise." A social enterprise refers to a company that aims not only to generate profit but also to pursue the public interest. As an example of a social enterprise framework, "benefit corporations," a type of legal entity introduced under the state laws of various US states, are required to define specific public interest purposes such as environmental conservation, support for small and medium-sized enterprises, or child welfare as part of the company's objectives. By adopting the benefit corporation framework, a company's management no longer needs to worry about shareholders complaining about the use of corporate resources to realize public interest goals. Furthermore, in the "Community Interest Corporation (CIC)" type of entity introduced in the UK, a cap is placed on the proportion of profits that can be distributed to shareholders as dividends, with the remainder intended to be used for the public interest purposes defined by each company.

In contrast, Japan does not have a specific legal entity type designed for social enterprises. However, I do not believe this necessarily means that Japanese companies are indifferent to public interest purposes. This is because it is possible that the need for a special legal entity type has not been recognized precisely because it has traditionally been taken for granted in Japan that for-profit corporations should prioritize stakeholders.

While it is important for for-profit corporations to play a role in realizing public interest purposes, if a company were to pursue public interest goals to the total exclusion of shareholder interests, there is a risk that investors might ultimately become hesitant to invest in the company. Although it is a difficult challenge, the relationship between for-profit corporations and the realization of public interest purposes will likely become an increasingly important issue for consideration in the future.