Good Corporate Citizenship We Can All Get Behind?: Toward A Principled, Non-Ideological Approach To Making Money The Right Way
U of Penn, Inst for Law & Econ Research Paper No. 22-44
Harvard Law School Program on Corporate Governance Discussion Paper No. 2022-8
Business Lawyer, Forthcoming Spring 2023
80 Pages Posted: 8 Dec 2022
Date Written: December 7, 2022
A rancorous debate is raging. Must for-profit corporations just seek profits for stockholders? Or may they pursue not just the best interests of all stakeholders, but influence public policy on controversial political issues and tilt the election process toward candidates and causes they favor?
This debate has historical antecedents, as both the left and the right have long been concerned about the legitimacy of corporations using other people’s capital for political and social causes. Each understands that stockholders share only one purpose — a solid return — and have diverse political beliefs. Each understands freedom is imperiled if workplaces become subject to dictated orthodoxies. Each asks: who are CEOs to use other people’s money to advance their own idiosyncratic views of the good?
But, rather than come together to forge constructive solutions, the right and left praise corporations that take policy positions they like, while condemning as illegitimate corporations that disagree with them. That’s natural but unhelpful.
This article seeks to ameliorate this fractious debate threatening to politicize a business world that ought to be open to all Americans of good faith. To this end, the article maps out a non-partisan, principled conception of good corporate citizenship drawing on shared assumptions of the right and the left about the place of corporations in our society and the realities of corporate governance.
That conception concentrates on how corporations’ own conduct affects the best interests of their stockholders, workers, communities of operation, consumers, taxpayers, and the environment. Seeking profit by selling quality products and services, treating all stakeholders with respect, and without externalizing costs. Supporting the basic institutions of the society upon which the corporation depends. Leaving debatable issues of politics and faith largely to their human investors, workers, and consumers to decide for themselves. Showing respect for the freedom of belief by not imposing the beliefs of corporate management on any stakeholder group. And, if taking stands on political or social issues not intrinsically connected to the company’s business, employing guardrails like approval by not just the full board, but stockholders, that create greater legitimacy and increase the likelihood that decisions will reflect consideration of all reasonable perspectives and embody a consensus view of their investors.
No approach can end all controversy, but corporate citizenship of this kind will channel corporations toward exemplifying their values through their treatment of the people their business operations directly affect and thus toward shared values held by most Americans. Focusing our corporate governance accountability system on the issue over which corporate leaders and institutional investors have the most responsibility — making money the right way — is one all Americans can get behind.
Keywords: environmental, social, governance, ESG, sustainability, corporate social responsibility, corporate purpose, stakeholderism, stakeholder capitalism, socially responsible investment, SRI, impact investing, corporate law, securities regulation SEC, disclosure, board diversity, human capital management
JEL Classification: G20, G28, G30, G34, K20, L21
Suggested Citation: Suggested Citation