July 19, 2011
Corporations/B.A. Roundtable: Taking Corporate Social Responsibility Seriously
Posted by Kent Greenfield

I wanted to add a few thoughts about teaching CSR in the basic course, to build on what Erik and David have said in their posts from yesterday.  

It strikes me that the question of the role of corporations in society and politics is one that is pivotal to cover in the basic course.  For those who will never take another business course, highlighting such issues may be one of the most important parts of the course.  For those students who plan on focusing on business law, it would be truly unfortunate if they went on to more specific and sophisticated classes without being asked to think seriously about the social and political role of business.

Having said that, there are myriad issues to address and just as many ways to address them.  My main goal is to legitimize the basic, fundamental questions and to identify a range of possible answers.  I also readily admit that I have a point of view on these questions (how, really, could I hide that fact?) but that I understand that there are a diversity of views.

As to method, as with so many topics in the course, I have changed over the years.  Now, I don't teach the charitable cases at all, mostly because I think they are largely a distraction from the principal questions of (1) to whom should the managers owe their duties, and (2) who should have a hand in making important corporate decisions.

 To get to these core questions, I actually start my class talking about the basic conceptions of the firm.  I talk about the traditional property theory, with shareholders as owners and managers as agents.  I then introduce the contractarian theory, showing how the firm works as a nexus of contracts.  Finally, I discuss the board-centered team production model.  I do this very early in the semester, sometimes in the first week.  The benefit of this pedagogy is that it gives students some theory that they can use to evaluate the doctrine as we go through it later.  Also, as we discuss the various theoretical formulations, I can talk easily about where the responsibilities flow and their sources (background norm, contract, corporate governance rules).  Of course the downside of this method is that the students who hate theory are left behind right out of the gate.

One thing that has been a constant over the course of my career is my teaching of Dodge v Ford.  It needs caveats, of course (does it really current law? etc.), but it provides a great way to ask the question of to whom fiduciary duties are owed.  And it also provides a good example -- often needed for those students who are too trusting of management for CSR reasons -- to teach about the dangers of giving managers too much power to manage the firm for what they believe are socially beneficial reasons.  Just when a contingent of students is eagerly arguing to protect Henry Ford's discretion, you can point out his horrible antisemitism.

One technique I have started using over the past couple of years is to circle back to this discussion at the very end of the course.  I sometimes spend a day talking about the implications of Citizens United, asking whether because the Court assumes corporations are "associations of citizens" we should change corporate governance law to make that more likely.  It is at this point where I can bring in reference to business law in Europe, whether it be the practice in some countries of co-determination or the new(ish) law in the U.K. calling on company directors to take into account (inter alia) "the interests of ... employees, ... the impact of the company’s operations on the community and the environment, ... and the desirability of the company maintaining a reputation for high standards of business conduct."

Again, my ultimate goal is simply to highlight the fact that the mainstream American view is not necessarily the only way to organize corporate governance or to define the role of business in society.  The nature of the implicit contract between business and society is very different elsewhere, and students should know that.  They should also be able to articulate why they think we should or should not move in that direction.

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