Abstract
This paper presents a novel framework for corporate governance based on Sen's capability approach. We show that the hierarchical structure of a firm and its corporate governance influence the capabilities of stakeholders. Furthermore, we illustrate the connection between capabilities and entitlements, which we term 'capabilities-as-entitlements' within the firm. Additionally, we identify criteria for allocating capabilities in the corporate domain and for resolving potential conflicts among stakeholders' capabilities within firms. Finally, we provide examples of capabilities-as-entitlements and measures of capabilities within firms.