CITIZEN CORP.

Abstract

Corporations are increasingly taking stands on a wide range of social issues: gun control, gender and race, immigration, abortion. Scholars have praised this development as the rise of responsible capitalism. Popularized accounts have attacked the “woke corporation” as ideological, elitist, and fraudulent. Both accounts examine the new “corporate activism” as a corporate governance matter. This Article, instead, focuses on the “activism” part. It argues that corporations’ new political engagement on divisive aims of society has turned them into “super-citizens” (given their size and complexity) and attempts to understand what the normative implications are.
We first show that corporations can be (super)citizens while remaining “good corporations,” i.e., value maximizing entities. Under the asset price effects arising from the “moral portfolio” choices of today’s largest investors, activism makes corporations more appealing to investors and hence more, not less, competitive. But good corporations cannot also be good citizens. Because of the exclusionary nature of activism—one cannot stand on both sides of a highly-charged social issue—and current equity reconcentration patterns, value- maximizing corporations have incentives to choose activist initiatives that exclusively cater to the majoritarian investor demand. This “corporate conformity” violates essential principles to which good citizens are held. It undermines the political freedom of stakeholder minorities (especially among employees) and jeopardizes political equality in the public adjudication of divisive issues.
We conclude by discussing potential remedies, but we warn that whether we want good corporations or good super-citizens might have become the new divisive—and quite intractable—issue of the day.

Keywords: corporate social responsibility, asset pricing, political equality, democracy, corporate voting

JEL Classification: D11, D21, D24, D51, D53, D62, D71, K20, K22, L21, L23, G11, G12, G34