The animated discourse on corporate social responsibility towards stakeholders in the last two years, particularly as embodied through the terms ESG, corporate purpose and stakeholderism (which will be used in this article interchangeably) had reached a turning point even before the COVID-19 pandemic. In addition to drastically increasing ESG-related investments, corporate actors (including shareholders, other stakeholder groups, directors, officers, institutional and retail investors judges and regulators) have been making efforts to turn ideological statements into practical initiatives, emerging one after another at a dizzying pace. Without a doubt, the fields of ESG and purpose-based stakeholderism have become mainstream in the academic and practical discourse of business, finance and law. Indeed, as is natural for changes that are perceived as paradigmatic and still in progress, there is not necessarily any consensus on such changes’ meaning, especially due to the absence of a theory that comprehensively describes, explains and justifies the increased discourse surrounding ESG issues. This study aims to bridge the gap between the idealistic vision of stakeholder capitalism, as manifested today in ESG risks and opportunities, and the shareholder-focused history of corporate law. The main thesis of the article is that the new view of corporate purpose and stakeholder capitalism is closely related to the concept of fairness, and hypothesizes that certain foundational concepts developed in the realm of behavioral economics, rather than traditional economic theory, can help describe and justify the newfound prominence of the stakeholder approach and the rejuvenated discourse around the framing of corporate purpose. The first two parts of the article are devoted to key insights from the world of behavioral economics and to the claim that the proliferation of declarative and practical ESG initiatives demonstrate powerfully how critical the idea of fairness is in human decision-making, in a manner that supports the findings of behavioral economics and which contradicts several basic assumptions of neoclassical economics. Based on these two parts, the article considers in its third part, the interrelationship between behavioral economics and the legal regulation of stakeholders and corporate purpose. This part opens with a descriptive review of the legal mechanisms - most of which are found within the basic doctrines of corporate law itself (such as separate legal personality, piercing the corporate veil and directors' oversight duties) and not only in non-corporate fields (such as specific legislative acts, the contract law principles of good faith and public policy, class action and taxes), which impose obligations towards stakeholders, and liability for failing to meet those obligations - as an integral part of the evolving broader conception of corporate purpose. The third part also makes a normative claim through exploring the competitive advantage offered by “early adopters” of fair corporate behavior– a natural consequence of the fall of “will theory” in modern contract law and the related weakening of the “nexus of contracts” conception of the corporation. The article concludes with the idea that the need to cope with the fairness bias, as emphasized by behavioral economics research, provides a solid foundation for legally implementing considerations of fairness into the modern corporation’s DNA by reframing the underlying approach towards the Companies Law, the primary legislation which regulates business sector activities. Such legal reframing of corporate purpose as one based on fairly considering stakeholder interests alongside profit-maximizing interests brings forth the expressive function of the law in integrating desired social and business norms based on an alternative culture of fairness and trust and serve as a significant and consistent keystone towards intrinsically implementing fairness and loyalty considerations into one of the most crucial economic (and social) institutions of our time
