I had not planned on participating in this roundtable, but David Millon and I have had some offline conversations about teaching Corporate Social Responsibility after I read the text of his post.

I agree with his legal analysis that shareholder wealth maximization is not dictated by corporate law (with a few exceptions) to the extent many law students believe. Managers do have quite a bit of flexibility in choosing the ends and means of corporate operations.

When teaching at New Mexico, though, I found students generally came to this conclusion a little too easily and were perhaps a little too uncritical of what corporate social responsibility means and how to foster it. I usually ask some of the questions at the end of this post to try to flesh out both what is the problem that CSR is meant to address and what is the solution. Is the solution about substantive changes in corporate activities, or is more about process (changing who has a seat at the table)?

I ask many of these questions because I am genuinely curious about this topic (even though I don't write about this area of law -- unlike many of our panelists). I am also not so sure that many legal scholars are on the same page as to what is CSR. My students tend to focus on issues like pollution and child labor. I then ask whether these issues should be deal with by corporate law or with environmental or labor law. Moreover, some of those issues – like pollution – might pit different “stakeholder” groups against one another. This raises the very thorny issue of “how would we identify socially responsible behavior?” In some classes, I lay out a hypothetical of two different shareholder groups pushing a corporation for and against a policy of granting benefits to the same sex domestic partners of the corporation’s employees.

I worry that by teaching this way I am discouraging students who have a real passion to change corporate law. Indeed, this class (which I normally teach at the end of the semester – more on that in a minute) tends to generate the liveliest discussion. Some students tend to see many of my questions as trying to discourage social activism, which I am not. My view is that we should take this idea seriously – and taking it seriously means examining it very closely.

At the same time, I don’t want critics of CSR to get too comfortable either. Some of the optional readings I have assigned in some semesters are critiques of CSR which argue for the division of the political world of government and the private world of corporations into separate spheres. As I have blogged about before, does that distinction make much sense after Citizens United?

I tend to focus on CSR in the last class of the semester. The downside of this is that some students misinterpret this as marginalizing the topic. But I want to ensure students have a sense of the structure of corporate law first, before we talk about what they would change.

Here are some of the questions I ask:

• Which rules or doctrines that we studies in this course, if any, would you change to make a corporation (or other form of business entity) more “socially responsible”?
• What is meant by “corporate social responsibility”? When is a corporation acting in a socially responsible manner?
• Which, if any, of the following strands of corporate law reform do you think is more important? 
  • Agency Cost Version of Corporate Law Reform: should corporate law focus more on making sure that management – directors and officers – actually acts in the best interest of shareholders?
    • For example, if you believe that there is a problem with exorbitant executive compensation, is the problem that executives are taking too much value from shareholders and that shareholders do not have adequate means to discipline management? Or is there a larger problem?
  • CSR Version of Corporate Law Reform: is the idea of shareholder primacy and the norm of shareholder wealth maximization too narrow? Does a corporation owe duties to constituents (“stakeholders”) other than shareholders? If so, who are these constituents? Employees? Communities in which the company is physically located? Communities in which the company sells or conducts operations? Consumers? The public? Who defines these constituencies? Who speaks for them? How should these constituencies be represented in corporate decision-making?
• Should corporate law attempt to change corporate behavior on particular social issues? If so which issues? Employee rights? The environment?
• How should corporate social responsibility or progress on certain social issues be measured?
• Is corporate law the right tool to encourage corporate social responsibility? Or should other laws – e.g. labor laws and environmental laws – be employed instead to meet the desired social goals?
• If corporate law is the right tool, what mechanisms in corporate law should be used? Proxy access?  
• How should law encourage corporate social responsibility? To what extent should laws or codes on “responsibility” be voluntary or permissive? To what extent should it be mandatory? How would any mandatory law be enforced and who could enforce it?
  • What do you think of state “shareholder” constituency statutes?
    • To what extent do these statutes, which allow management to take into account other stakeholders besides shareholders in making decisions, only insulate management from takeovers?
• To what extent does corporate social responsibility undermine efforts in the agency cost strand of corporate law reform, i.e. making management more accountable to shareholders? To what extent do these two strands of corporate law reform conflict?
• To what extent do these two strands of corporate law reform mesh? Would efforts to give shareholders more access to the proxy ballot enable more radical reformers to submit other items – environmental responsibility, labor rights – to a shareholder vote?
• To what extent is the market already making corporations more socially responsible?
  • What do you think of “corporate codes of conduct” voluntarily enacted by corporations or industry groups?
  • What do you think of corporations that market themselves as being good corporate citizens?
  • How do you evaluate the claims of corporations of corporate citizenry?
• Should all corporations (and other business entities) of whatever size be subject to corporate social responsibility standards? Or only big, publicly held corporations? Is it equitable or efficient to hold smaller business entities to the same or different standards as big corporations? Where do you draw the line?
• What can the U.S. learn from corporations and laws in other countries?
  • Are the different corporate governance laws in Europe a good model for the U.S.? For example, many European countries have two board of director entities, with labor groups having a seat on one of the boards.
  • Alternatively, would corporate responsibility standards undermine U.S. competitiveness?
• Should the participation of corporations in the political process – e.g. by making political contributions – be limited by law? (If the students have already read Bellotti or Citizens United, we discuss those cases). Should shareholders be able to limit (or vote on) the political activities of corporations?

Corporate Governance, Corporate Law, Roundtable: Corps/B.A., Social Responsibility, Teaching | Bookmark

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e201538ff1a17e970b

Links to weblogs that reference Corporations/B.A. Roundtable: Taking Corporate Social Responsibility Seriously: