Why the social duty of care for companies must be regulated by law

Emeritus speech by Prof. Leen Paape

December 8 2022

It is taking too long for companies to put well-being before profit. That is why a social duty of care must be enshrined in law. This is what Leen Paape says in his farewell speech as Professor of Corporate Governance at Nyenrode.

If you look around you, you see that society in the Netherlands is deadlocked in many aspects, according to Paape. Energy, climate, care, education, the tax authorities, nitrogen, PFAS, migration. And then there is the war in Ukraine. He sees the need for fundamental changes. “Nyenrode was founded in 1946 to help rebuild the country. As a society, we have successfully achieved this beautiful mission. But somewhere we got so smug off the track that a lot is now deadlocked,” says Paape. “What I would like to see is that companies take more social responsibility. Companies get their license to operate from us, as a society. To me, they therefore have a social duty of care: to ensure long term social welfare. And to take everyone's interests into account. And if you really want to do that well, you have to look 7 generations ahead.”

We need new goals

“Since the Second World War, growth and profit have been central to our way of thinking. Now that we see so much stalling, it's time to rethink our goals. Because they determine what we do. As long as the goal is solely to make a profit, combating the climate crisis and combating polarization in society will not get off the ground as well. So we need to start this conversation together! As a society, we will no longer have to strive exclusively for prosperity in a material sense, but also for well-being. That's complicated, but also necessary!”

Use the law to accelerate change

Now we can clearly see the first steps taken towards those new goals. Judges who say to Shell, for example: “You must try harder!” For Paape, these are signs that social views are changing. There are also certainly politicians, NGOs, and entrepreneurs who support this philosophy and who are also taking the right steps in practice. And younger generations will increasingly demand that climate, for example, is put center stage.

To speed things up, Paape believes that the social duty of care for companies should be included in law. “Otherwise things won't get any better!” And according to him, it isn’t difficult to get this done legally. “Amend the Dutch Civil Code. Book 2, Article 8 states how directors of companies should behave: they must do what reasonableness and fairness require of them. You only have to add the social duty of care to this. This then ensures that different considerations are made in both the boardroom and the courtroom, because the law enforces it.”

Science and practice

Paape is a versatile man. Scientist, yes. But just as well a director and supervisor. After his education at the Royal Military Academy, he worked for 11 years in the Army and Air Force. Meanwhile, he studied to be an accountant, went to work at KPMG, and then at KLM. He then combined a partnership at PwC with a part-time position at Erasmus University, where he also obtained his PhD. Fifteen years ago, he came to work at the Nyenrode Business University. First as a director and later also as professor of Corporate Governance. In addition, he is and will remain a supervisor at Univé (insurance company), the IMF, ABP, BOOR Foundation and SNS Reaal Retirement fund. In this capacity he continues to challenge organizations to set new goals. And actually behave differently.

Looking back at the years at Nyenrode

When asked about the most important social result of his work at Nyenrode, Leen Paape is modest: “Twelve years ago, Nyenrode was told that it would be partly responsible for the financial crisis. Didn't we train those people who screwed up so much?! We took this criticism to heart. And added stewardship as a third core value to leadership and entrepreneurship. And that is more than just a nice word. Nyenrode has evolved along with changing views on corporate social responsibility. Based on our mission ‘Serving society by shaping responsible leaders’, we have trained many students in recent years. I am confident that they will make a difference in the coming years as responsible leaders.”

 Download the booklet below.

Nyenrode newsletter

Nyenrode shares knowledge with interested professionals. Apply to news@nyenrode for al news of Nyenrode.