Race, Corporate Law, and Shareholder Value

Abstract:     
The collapse of the dot.com stock boom and the subsequent spate of corporate scandals have provoked new skepticism toward big business, corporate law and related institutions. Despite the post-Enron skepticism about corporate law, however, a key element of 1990s thinking holds sway: the near-exclusive focus on increased shareholder value as the normative criterion for evaluating corporate behavior and related public policy. Discussions of race in the corporate law context have lately tended to operate on these terms - thus, for example, racial diversity in corporate management and workforces has been justified in terms of its positive effect on shareholder value. Racial justice is becoming a taboo subject, which often has to be explained and justified in nominally race-neutral terms. In the post-Enron era, shareholder value is a particularly potent race-neutral mode of discourse.

The question is the extent to which issues of racial justice can and should be addressed in shareholder value terms. While the rhetorical strategy of linking diversity to the bottom line is potentially powerful in the current political and cultural climate, the strategy also has limitations and costs. First, it is not clear that diversity and improved corporate performance always go hand in hand. Second, even strong evidence of a correlation between the two would not necessarily constitute a legal basis to compel corporations to take any action to further racial justice. Third, there is a danger that adopting the rhetoric of shareholder value will contribute to the dominance of that discourse while allowing arguments for the intrinsic value of racial justice to atrophy.

Number of Pages in PDF File: 23

Keywords: Corporations, corporate governance, race, corporate social responsibility

JEL Classification: K22, L21, K39

Accepted Paper Series