Hohfeld in the Boardroom

Summary

Roberto Tallarita argues that the long-running corporate purpose debate is muddled because it treats “purpose” as a single, primitive concept rather than a bundle of discrete legal relations. Drawing on Wesley Hohfeld’s framework, Tallarita reframes corporate purpose as an interlaced matrix of entitlements (rights, privileges, powers) and correlative disablements (duties, no-rights) among actors — managers, shareholders, stakeholders and the state. He shows how different configurations of these Hohfeldian relations produce distinct outcomes for concrete business choices (for example, whether to build a polluting plant or a greener facility), and explains why proposals to “re-orient” corporate purpose must specify which legal relations are being changed, between whom, and under what conditions.

Key Points

The corporate purpose debate is stuck because it relies on broad, vague “lump concepts” like “shareholder primacy” and “stakeholder governance.”
Hohfeld’s analytic toolbox breaks legal concepts into atomistic relations (rights, duties, privileges, powers) that clearly map who can do what and who can stop whom.
Concrete business decisions should be modelled as specific Hohfeldian relations between two actors and one activity (e.g., CEO & shareholders over building a green plant).
Tallarita outlines five Hohfeldian models showing how the same decision can be allocated differently (duty vs privilege; which actor holds the correlative right).
Real-world corporate governance typically features managerial privilege constrained by adversarial rights and powers of shareholders, the state and stakeholders — not a single universal duty.
Reforms must specify changes to legal relations (who gains rights, who gains duties, what disablements apply) rather than rhetorically “re-orienting” purpose.
Expanding managerial privilege is risky unless paired with verifiable benevolence or enforceable duties/countervailing powers.

Content summary

Tallarita begins by diagnosing why decades of debate on corporate purpose have produced little consensus: much of the discussion uses sweeping labels that conceal underlying legal structures. He borrows Hohfeld’s framework — which decomposes legal concepts into binary relations between actors and activities — to offer a clearer vocabulary for corporate governance.

Using the simple example of choosing between a polluting plant and a greener facility, he describes five concrete Hohfeldian permutations in which the CEO, shareholders, the state or stakeholders hold the relevant rights or duties. Each permutation corresponds to different theoretical positions in the literature (from strict shareholder duties to permissive managerial discretion).

Crucially, Tallarita emphasises that corporate decision-making in practice will mix these relations across contexts; there is no feasible universal duty to always prioritise shareholder wealth or social welfare. The argumentative focus should therefore shift to defining the scope of managerial privilege and the adversarial legal relations that check it. Policy proposals must specify which entitlements and disablements change, between which actors, and on what evidentiary basis.

Context and relevance

This paper matters because it supplies a precise conceptual language for a debate that has been mired in slogans and inconsistent definitions (e.g., “stakeholders,” “ESG”). For directors, regulators and advisers redesigning corporate law or firm-level governance, Hohfeldian mapping forces clarity: who will have enforceable rights, who will be constrained, and how will managers’ discretion be calibrated. The approach intersects with current regulatory and investor-led efforts to rebalance corporate obligations and with debates about when to expand corporate authority versus when to impose binding limits.

Why should I read this?

Want a sharp, practical toolkit for untangling the foggy rhetoric around corporate purpose? This article gives you one. It translates high-level arguments into concrete legal relations you can map, test and legislate around — so you stop arguing about labels and start debating who actually gets what power and duty.