Green is Good: Sustainability, Profitability, and a New Paradigm for Corporate Governance

Abstract

This Article relates the concept of sustainability - that we must meet our present needs without infringing on future generations' ability to do the same - to corporate governance and seeks to reconcile any conflicts between the two. The largest of these conflicts is the commonly held view that companies must strive to maximize shareholder wealth and affirmatively neglect all other constituencies and considerations. This Article debunks this myth, both as a matter of law and as a function of social norms, market influences, and corporate law theory. The Article then presents a new paradigm for corporate governance wherein companies voluntarily commit themselves to sustainable business practices. One of these new sustainable business models is the "B Corporation" certification that has garnered recent attention in the national business press. A second model hails from Oregon, where a newly enacted corporate law provision encourages businesses to pledge to act sustainably.

Keywords: sustainability, sustainable business, green business, shareholder wealth maximization, corporate social responsibility

JEL Classification: K22, K32