Against Corporate Activism: Examining the Use of Corporate Speech to Promote Corporate Social Responsibility

Abstract

This Article offers a novel typography of expenditures on corporate social responsibility highlighting that such spending often requires a public business corporation to engage in corporate speech. When this speech pertains to social or political issues unrelated to the company’s business, this Article argues that such expenditures are generally not in the best interests of the firm’s stockholders, and terms this spending “corporate activism.” Corporate activism is described as the product of agency costs and ideological conflict that derive from an expansion of corporate speech rights under the First Amendment. To protect shareholders from corporate activism, courts have relied upon various disciplining mechanisms that are often not up to the task. This Article offers a different solution, placing the responsibility squarely upon the board of directors of public corporations to limit “expressive” expenditures on corporate social responsibility that do not directly advance the best interests of a company’s shareholders. As a tentative policy proposal, this Article suggests that the Securities and Exchange Commission (SEC) require all public companies that trade on stock exchanges in the United States to have a “Communications Committee” responsible for the oversight of all forms of corporate speech.

Keywords: Corporate Governance, Corporate Social Responsibility, Corporate Speech, Agency Costs, Corporate Activism, Ideological Conflict, Communications

JEL Classification: G34, K22, L21