Corporate Dilemmas

The neoliberal orthodoxy that corporate managers' sole duty is to maximize shareholders' financial value (shareholder primacy) 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 (stakeholderism). 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 risk-adjusted 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 non-pecuniary 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 a neoliberal framework or require a new framework.