Marshalling Reputation to Minimize Problematic Business Conduct

99 B.U. Law Review 1193 (2019)

36 Pages Posted: 13 Jun 2019 Last revised: 18 Jul 2019

See all articles by Claire A. Hill

Claire A. Hill

University of Minnesota Law School

Date Written: May 29, 2019

Abstract

There are many examples of problematic corporate behavior. If law could readily do a better job preventing or punishing the behavior, it would. But law is limited in what it can address. In some cases, legal solutions are impossible or infeasible. Specifying the behavior at issue may be impossible, specification may yield a roadmap for other egregious behavior, and/or enforcers may be hopelessly outmaneuvered or outresourced. In other cases, legal solutions are undesirable. Mandating the ‘golden rule’ in all business relationships is not a good idea, nor is deeply encroaching on people’s autonomy to prevent them from making decisions that government thinks aren’t good for them.

What might help? Reputation is generally thought to be a constraint on corporate conduct. Corporations are assumed to want a good reputation if for no other reasons than instrumental ones, and to do things they would not otherwise do, and to refrain from doing things they would otherwise do, in order to get it. Scholarly analyses emphasize the role of reputation given that corporations are repeat players who rely on the continuing good favor of, among others, customers and regulators.

I argue here that reputation can work better than it has to discourage problematic corporate conduct. The first step, albeit a huge one, is to develop a principled concept of what reputation should require--more precisely for purposes of this paper, what a good reputation should not permit. The second step is to argue that at this juncture, with increasing attention paid to corporate social responsibility (CSR), sustainability, environmental, social, and governance (ESG) initiatives, and broader themes of corporate good citizenship, as well as regular revelations of problematic corporate behavior, such a concept could get real traction with important and influential constituencies, notably including institutional investors. With CSR and ESG, investor activism has been pro-active rather than reactive. Companies’ practices as to the environment, diverse boards, and other such matters are investigated and those with practices deemed problematic are pressured to do better. What if companies’ business models or practices were subject to the same type of scrutiny? Institutional investors are well situated to ask, and get answers to, searching questions, and pressure companies to institute needed reforms.

In an earlier paper, I began an inquiry, focusing there on what I called Repugnant Business Models. Here, I build on that inquiry, moving from the concept of outrage, which could be individual or collective, to the concept of reputation, which is necessarily collective. I discuss how reputation works, and expand beyond repugnance to consider business models and practices short of repugnance but still “antisocial.” I build, too, on my inquiry in that paper as to extra-legal mechanisms by which this broader conception of reputation could more effectively reduce problematic corporate conduct.

Keywords: Reputation, corporate conduct, corporate social responsibility, CSR, environmental social and governance, ESG, corporate good citizenship, Repugnant Business Models

Suggested Citation

Hill, Claire Ariane, Marshalling Reputation to Minimize Problematic Business Conduct (May 29, 2019). 99 B.U. Law Review 1193 (2019). Available at SSRN: https://ssrn.com/abstract=3395887

Claire Ariane Hill (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-624-6521 (Phone)

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