CITIZEN CORP.

69 Pages Posted: 26 Feb 2021 Last revised: 28 Mar 2022

See all articles by Simone M. Sepe

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI); American College of Governance Counsel

Saura Masconale

The University of Arizona Department of Political Economy and Moral Science; Center for the Philosophy of Freedom

Date Written: February 25, 2021

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

Suggested Citation

Sepe, Simone M. and Masconale, Saura, CITIZEN CORP. (February 25, 2021). European Corporate Governance Institute - Law Working Paper No. 568/2021, Available at SSRN: https://ssrn.com/abstract=3793035 or http://dx.doi.org/10.2139/ssrn.3793035

Simone M. Sepe (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

University of Toulouse 1 - Université Toulouse 1 Capitole ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
Toulouse Cedex, F-31042
France

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

American College of Governance Counsel ( email )

555 8th Avenue, Suite 1902
New York, NY 10018
United States

Saura Masconale

The University of Arizona Department of Political Economy and Moral Science; Center for the Philosophy of Freedom ( email )

315 Social Science Building
Tucson, AZ 85721
United States

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