Bainbridge and Cowen are discussing corporate social responsibility. When I get back into digital civilization, I hope to have more detailed comments. For now, I just want emphasize that debates on corporate social responsibility often fail to specify what's at issue. I think its helpful to keep in mind the framework for the debate discussed in my paper, Accountability and Responsibility in Corporate Governance:
- First, markets significantly align shareholder and social interests. It is sometimes necessary to make the tradeoff, but not as necessary as many commentators think.
- Second, like it or not, corporate law, featuring the business judgment rule, weak shareholder voting rights, and a spotty market for control, gives managers very broad discretion to decide precisely whose interests to maximize. So corporate social responsibility is more a business question than a legal question.
- Third, only extremists would seriously advocate requiring managers to maximize non-shareholder interests.
- Fourth, except for extremists, the corporate social responsibility issue has legal significance only if there is some feasible way to make managers significantly more accountable to shareholders than they are under current law. My article suggests possible alternative accountability mechanisms based broadly on partnership law that might trigger a real social responsibility debate.
Comments