Corporate Social Responsibility vs. Shareholder Value Maximization: Through the Lens of Hard and Soft Law
48 Pages Posted: 25 May 2018
Date Written: May 22, 2018
While an increase number of firms around the world has been engaging in corporate social responsibility (CSR), many people still perceive CSR as voluntary commitment on one hand and shareholder value maximization (SVM) as mandatory requirement on the other. This paper adopts the concept of hard law and soft law in terms of coerciveness, and overturns the stereotype that SVM is a hard-law constraint and CSR a soft-law constraint. The paper first demonstrates company directors are not obliged to maximize shareholder value even in the Anglo-American jurisdictions where shareholder primacy culture is more dominant, then critically discusses an enforceable regulatory regime for CSR. After studying various countries’ practices, this paper highlights three main forms of the hard-law approach for CSR: namely through (a) enacting mandatory CSR laws to directly promote socially responsible behavior; (b) other bodies of law to elevate minimum obligations for deterring socially irresponsible behavior, and/or (c) mandatory disclosure of CSR-related issues. The conventional justification for CSR is subsequently challenged, namely why shall we align CSR with SVM after the above misunderstandings being corrected. More importantly, in addition to overcome the weakness of soft law’s non-coerciveness, the hard-law approach may also provide further grounds for furthering CSR.
Keywords: Corporate social responsibility (CSR), shareholder value maximization (SVM), hard-law approach, mandatory CSR, regulatory initiative, CSR reporting
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