Responsible Profitability? Not on My Balance Sheet!

Abstract:     
Free-market capitalists believe in the syllogism that if a free market results in progress, and if progress is good, then by definition, a free market must be good. Two hundred years of economic development stand in testament to this premise. The capitalist model, premised on the notion of a free market ideology, is credited with making many of the riches enjoyed by society as a whole. The pursuit of economic freedom by individuals is among the primary reasons motivating the founding of The United States of America. Free Market Capitalism is now firmly entrenched as the model for economic development, in the U.S., and abroad. The corporation can be credited with contributing greatly to the advancement of the doctrine of free-market capitalism.

The thesis of this paper is that notwithstanding the contributions by the corporation, the corporate entity has caused significant harm to society. Traditional legal theory has failed to adequately discourage socially undesirable choices by corporations or to encourage socially responsible action by corporate actors. As a result, legislation must be passed which encourages socially responsible choices by corporations. Without legislation, corporations will continue to engage in behavior which is socially undesirable, albeit, profitable for its shareholders.

I propose legislation which will encourage responsible choices by corporations. The first piece of legislation involves changing financial accounting rules to encourage corporations to currently invest in corrective actions while deferring the expense reporting through depreciation charges. The second piece of legislation involves creating a plaintiffs’ litigation fund to be paid with excise taxes in the event the corporation chooses to disregard corrective action. The proposed legislation encourages corporations to choose corrective action and provides corporate management with the legal justification for its action

Number of Pages in PDF File: 50

Keywords: Tax, Accounting, Law & Economics, Corporations, Corporate Responsibility

JEL Classification: K10, K20, K22, K34, K42

Accepted Paper Series