Global Warming and the Management-Centered Corporation

Abstract:     
Corporate governance power is heavily concentrated in upper management, not in shareholders. With respect to social problems, including global climate change, that may be a good thing. Public company shareholders are overwhelmingly financial investors who are unlikely to see themselves as responsible for a corporation’s effect on society. Corporate managers, in contrast, have some degree of moral accountability for industry's effect on climate, as well as self-interested reasons to care about the shape of regulation. The weakness of shareholders gives managers room to make social choices without shareholder input.

Whether and how corporations respond to the challenge of global warming, then, will not depend primarily on shareholder participation in governance. Rather, it will depend on outside forces that appeal to the moral conscience and the self-interest of corporate executives and boards. Chief among these forces will be federal and global regulation. Regulation and lawsuits by state governments are currently running ahead of the federal government. Private parties have also filed lawsuits against major greenhouse gas emitters. These developments by themselves are of course insufficient to address global, systemic problems like climate change. But they may pave the way for comprehensive federal and global regulation. First, lawsuits and state laws may increase public awareness, increasing political support for regulation and moral pressure on the individual executives and directors who are the public face of corporations. Second and moreover, the specter of piecemeal state regulation and state and private litigation may convince corporate leaders to cooperate with federal and perhaps global regulation.

Number of Pages in PDF File: 33

Keywords: climate change, global warming, corporations, corporate governance, corporate social responsibility

JEL Classification: K22, K32

Accepted Paper Series