Caremark as Soft Law
17 Pages Posted: 11 Sep 2018
Date Written: August 29, 2018
This Essay, included in Temple Law Review’s symposium issue on Caremark, assesses the influence of “Caremark duties.” Under Caremark, directors have duties to monitor their corporations for wrongdoing. Caremark has been extremely influential; firms spend considerable amounts of time and money “complying” with what are now called Caremark duties. But liability for breach of Caremark duties is exceedingly unlikely, and, in almost all cases, is completely avoidable with only minimal effort, far less than is typically expended. This Essay considers how Caremark can be both influential and legally toothless—that is, how it operates as “soft law.” As soft law, Caremark can have a considerable penumbra beyond what law requires, encompassing other aspects of corporate good citizenship. I argue here that the Caremark penumbra, together with other forces promoting greater attention to societal interests, is bringing about a considerable convergence between profit maximization and corporate social responsibility, broadly construed.
Keywords: Caremark, soft law, corporate governance, social norms, compliance
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