Corporate Purpose: Beyond Shareholder Value

The neoliberal orthodoxy that corporate managers' sole duty is to maximize shareholders' financial value has never been entirely adhered to in practice and has been increasingly challenged in recent decades. While acknowledging the importance of shareholder value, commentators have argued that corporations should purposively benefit other stakeholders, including customers, employees, and the communities they affect. At the same time, there has been an upswing of investments aligned with investors' social interests, including public equity investments in companies with high environmental, social, and governance (ESG) ratings and private equity "impact investments" that typically incur greater risks than pure market rate investments. This course will consider a variety of legal, ethical, and policy issues related to corporations' purposes and responsibilities, including: the meanings and measures of corporate social responsibility (CSR) and ESG criteria; disclosure of a company's environmental and social harms or risks; when is it legally and ethically appropriate for corporate managers or institutional investors to compromise shareholder value in the pursuit of social, environmental and other nonpecuniary goals; constituency statutes and benefit corporations that reflect interests other than profit maximization; the power of investors to influence corporate behavior through affirmative investments, divestments and shareholder activism; the power of various stakeholder groups to influence corporate behavior; proposals for broadening the purpose of corporations; barriers to these various practices and proposals; and whether they can be accommodated within neoliberal ideology or require a new framework. You may write a series of short commentaries on four of the sessions. Students electing this option will be graded on a Mandatory Pass/Restricted Credit/Fail basis and receive 2 units of credit. Alternatively, you may write a single empirical research paper on a topic of your choice. This will satisfy the Law School's Research requirement. These papers will be graded on an Honors/Pass/Restricted Credit/Fail basis. Students taking the seminar for R credit can take the seminar for either 2 or 3 units of credit (section 02), depending on the project and paper length. After the term begins, students accepted into the course can transfer from section (01) into section (02), which meets the R requirement, with consent of the instructor. This class is limited to 20 students, with an effort made to have students from SLS (15 students by lottery) and 5 GSB students by instructor consent. Elements used in grading: attendance, class participation; written assignments or research paper.