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American Theoretical Debates over CSR

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Legal Perspectives on Corporate Social Responsibility

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Abstract

In recent years, corporate social responsibility (CSR)-specific business practices have emerged as a major focal point of management strategy in the United States. Such practices, however, do not comprise normative CSR. Meanwhile, proponents of implementing this type of CSR have gradually found their voice in American legal scholarship. Chapter 3 thus examines the legal debate surrounding normative CSR in the United States.

As Sect. 2 illustrated, the controversy in the American debate over CSR’s legal implementation stems from the need to clearly define the purpose of corporations with respect to the nature of the fiduciary obligations of managers. This will be demonstrated in the first part of this chapter, which provides a brief analysis of the theoretical fundamentals regarding CSR in the United States by reviewing general perceptions about the fiduciary duties of managers as they relate to shareholders. This analysis is then followed by an overview of the main controversy in the American CSR debate, i.e., whether managers can (or should) be fiduciaries for stakeholders other than the shareholders of the corporations. Indeed, the critical question was precisely articulated in the Berle–Dodd debate examined in the previous chapter. Accordingly, the second part of the chapter introduces the pertinent traditional corporate theory, i.e., the shareholder primacy model, which denies normative CSR pursuant to Berle’s initial arguments; it then proceeds to analyze the theoretical foundation of this model. The chapter concludes by charting the emergence of the stakeholder model supporting CSR legalization in the vein of Dodd’s refutation of shareholder primacy, and examines the model’s rationale. By exploring these theoretical models, this book assesses whether and to what extent non-US legal systems, in particular, Korean law, can tap the American legal debate in order to selectively transplant and codify such corporate theories articulating CSR.

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Notes

  1. 1.

    See Sandra A. Waddock et al., Responsibility: The New Business Imperative, 16 Acad. Mgmt. Exec. 132, 137 (2002).

  2. 2.

    For information on descriptive, instrumental, and normative approaches implementing CSR, See supra Sect.  2.2.3 ; See also Gina Iacona, Going Green to Make Green: Necessary Changes to Promote and Implement Corporate Social Responsibility While Increasing the Bottom Line, 26 J. Land Use & Envtl. L. 113, 126 (2010).

  3. 3.

    See Iacona, supra note 2.

  4. 4.

    See Lisa M. Fairfax, The Rhetoric of Corporate Law: The Impact of Stakeholder Rhetoric On Corporate Norms, 31 J. Corp. L. 675, 676 (2006); Henry N. Butler & Fred S. McChesney, Why They Give at the Office: Shareholder Welfare and Corporate Philanthropy in the Contractual Theory of the Corporation, 84 Cornell L. Rev. 1195, 1195 (1999); William T. Allen, Our Schizophrenic Conception of the Business Corporation, 14 Cardozo L. Rev. 261, 264 (1992) (noting that “The question, what is a corporation, has a correlative question: For whose benefit are those in control of a corporation supposed to act?”).

  5. 5.

    For information about the debate between Berle and Dodd, See supra Sect. 2.3.

  6. 6.

    See Allen, supra note 4; Fairfax, supra note 4; Butler & McChesney, supra note 4.

  7. 7.

    See Berle, Corporate Powers as Powers in Trust, supra note 195 in Chap 2, at 1074, see supra Sect. 2.3.

  8. 8.

    See Dodd, supra note 162.

  9. 9.

    Berle assumed that corporate law “becomes in substance a branch of the law of trusts” in terms of the relation between shareholders and managers as fiduciaries of shareholders. Berle, supra note 195 in Chap. 2.

  10. 10.

    See Dodd, supra note 139 in Chap. 2.

  11. 11.

    U.S. Cent. Underwriters Agency, Inc. v. Hutchings, 952 S.W.2d 723 (Mo. Ct. App. E.D. 1997).

  12. 12.

    See Pelletier v. Schultz, 276 S.E.2d 118 (Ga. Ct. App. 1981) (stating “a corporate office or director owes to the corporation and its stockholders a fiduciary or quasi-fiduciary duty, which requires that they act in utmost good faith…Directors and officers have a fiduciary duty to the corporation and its stockholders.”).

  13. 13.

    Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens, 81 Temp. L. Rev. 831, 835 (2008).

  14. 14.

    See generally In re Allegheny Intern., Inc., 954 F.2d 167 (3d Cir. 1992) (applying Pennsylvania law); Jordan v. Hunter, 865 P.2d 990 (Idaho. Ct. App. 1993).

  15. 15.

    See Dirks v. SEC, 463 U.S. 646, 672 (1983).

  16. 16.

    Federal Deposit Ins. Corp. v. Sea Pines Co., 692 F.2d 973, 977 (4th Cir.1982) (citing Koehler v. Black River Falls Iron Co., 67 U.S. 715, 720 (1862)).

  17. 17.

    Ashman v. Miller, 101 F.2d 85, 90–91 (6th Cir.1939)

  18. 18.

    Guth v. Loft, Inc., 5 A.2d 503, 510 (Del.1939)

  19. 19.

    Newby v. Enron Corp., 188 F.Supp. 2d 684, 704 (S.D. Tex. 2002) (quoting Victor Brudney, Fiduciary Ideology in Transactions Affecting Corporate Control, 65 Mich. L. Rev. 259, 260 (1966). “[T]he fiduciary responsibility of an officer or director attaches as a concomitant of his selection by the stockholders to represent them in managing their investment. Because the power over their investment thus delegated to him is representational, the duties he owes and the restrictions to which he is subject in his dealings with respect to their ‘property’ are rooted in the law of agency and the law of trusts, which govern comparable representational relationships.”)

  20. 20.

    Joseph T. Walsh, The Fiduciary Foundation of Corporate Law, 27 J. Corp. L. 333, 333 (2002) (noting that “[i]t is commonplace in corporate litigation to use the term ‘fiduciary’ to describe the relationship between directors and shareholders” and warning that it is used “sometimes inaccurately, as a convenient method of categorizing a broad concept of responsibility in corporate law.”).

  21. 21.

    Model Bus. Corp. Act § 8.30(a) (2009) (“Each member of the board of directors, when discharging the duties of a director, shall act: (1) in good faith, and (2) in a manner the director reasonably believes to be in the bests interests of the corporation.”).

  22. 22.

    Id. § 8.60 (2009) (According to the Model Business Corporation Act, directors must refrain from self-dealing transactions and serve the corporation’s interests before they serve their own interests. Id. § 8.60(1), (5), (6).).

  23. 23.

    Jackson v. Ludeling, 88 U.S. 616 (1874); Berger v. Amana Soc., 111 N.W.2d 753 (Iowa 1961); Paddock v. Siemoneit, 218 S.W.2d 428 (Tex. 1949).

  24. 24.

    F.D.I.C. v. Jackson, 133 F.3d 694 (9th Cir. 1998) (applying Arizona law); Henash v. Ipalook, 985 P.2d 442 (Alaska 1999); Small v. Fritz Companies, Inc., 65 P.3d 1255 (Cal. 2003); Ostrowski v. Avery, 703 A.2d 117 (Conn. 1997); Mynatt v. Collis, 57 P.3d 513 (Kan. 2002); Hill v. Southeastern Floor Covering Co., Inc., 596 So. 2d 874 (Miss. 1992).

  25. 25.

    U.S. v. Byrum, 408 U.S. 125 (1972); In re Stat-Tech Intern. Corp., 47 F.3d 1054 (10th Cir. 1995) (applying Colorado law); Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985); Enchanted Valley RV Resort, Ltd. v. Weese, 526 S.E.2d 124 (Ga. Ct. App. 1999); Knox-Tenn Rental Co. v. Jenkins Ins., Inc., 755 S.W.2d 33 (Tenn. 1988).

  26. 26.

    Dodd also accepted this notion. See Dodd, supra note 139 in Chap. 2, at 1146–47.

  27. 27.

    See supra Sect. 3.1.

  28. 28.

    See supra Sects. 3.1 and 3.2.

  29. 29.

    See Marleen A. O’Connor, Restructuring the Corporation’s Nexus of Contracts: Recognizing a Fiduciary Duty to Protect Displaced Workers, 69 N.C. L. Rev. 1189 (1991).

  30. 30.

    See Dodd, supra note 139 in Chap. 2, at 1160; about Dodd’s arguments see supra Sect. 2.3.

  31. 31.

    See infra Sect. 3.2.2.

  32. 32.

    For information on the debate between Berle and Dodd, see supra Sect. 2.3; see also Dodd, supra note 162 (argued that corporate managers should have the discretion to consider the needs of a corporation’s constituencies when making decisions); Berle, supra note 218 (refuted Dodd’s idea on the grounds of the shareholder wealth maximization norm.); for information about landmark cases regarding the issue, see Dodge v. Ford, 170 N.W. 668 (Mich. 1919), and A.P. Smith Mfg. Co. v. Barlow, 98 A.2d 581 (N.J. 1953). For more information about the Berle–Dodd debates, see Wells, supra note 199 in Chap. 2, at 82–96 (2002) (pointing out that each new debate recapitulates the earlier debate in a slightly altered form. Id. at 78.); Stephen M. Bainbridge, Community and Statism: A Conservative Contractarian Critique of Progressive Corporate Law Scholarship, 82 Cornell L. Rev. 857, 902–03 (1997); Joseph L. Weiner, The Berle-Dodd Dialogue on the Concept of the Corporation, 64 Colum. L. Rev. 1458 (1964).

  33. 33.

    See Dodd, supra note 139 in Chap. 2.

  34. 34.

    See O’Connor, supra note 288.

  35. 35.

    Stephen M. Bainbridge, The New Corporate Governance In Theory and Practice 23 (2008).

  36. 36.

    See Joe W. Pitts, Corporate Social Responsibility: Current Status and Future Evolution, 6 Rutgers J.L.& Pub. Pli’y 334 (2009); Terry Collingsworth, Corporate Social Responsibility, 16 St. Thomas L. Rev. 669 (2004); Owen E. Herrnstadt, Voluntary Corporate Codes of Conduct: What’s Missing?, 16 Lab. L. 349 (2001); Lynda J. Oswald, Shareholders v. Stakeholders: Evaluating Corporate Constituency Statutes Under the Takings Clause, 24 J. Corp. L. 1 (1998); Milton Friedman, The Social Responsibility of Business is to Increase Its Profits, N.Y. Times, Sept. 13, 1970; Milton Friedman, Capitalism and Freedom 133 (1962). However, the influence of shareholder primacy in corporate law is another issue. See D. Gordon Smith, The Shareholder Primacy Norm, 23 J. Corp. L. 277 (1998).

  37. 37.

    See Bainbridge; Elhauge; Joo; Lee; Meese; Radin; Smith; Mitchell & Gabaldon; Blair & Stout, supra note in Chap. 2.

  38. 38.

    See Stephen Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 Nw. U. L. Rev. 547, 563 (2003) (“Today, most corporate law scholars embrace some variant of shareholder primacy.”); Fairfax, supra note 263, at 676; Ronald Chen & Jon Hanson, The Illusion of Law: The Legitimating Schemas of Modern Policy and Corporate Law, 103 Mich. L. Rev. 1, 37 (2004) (stating the resurgence of shareholder primacy since the 1970s); Henry Hansmann & Reinier Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439, 440–41 (2001); Millon, Redefining Corporate Law, supra 24 Ind. L. Rev. 223, 230 (1991).

  39. 39.

    Hansmann & Kraakman, supra note 297, at 468.

  40. 40.

    Fairfax, supra note 263, at 676.

  41. 41.

    Model Bus. Corp. Act § 8.30 cmt. 1 (2009).

  42. 42.

    Dodge v. Ford Motor Co, 170 N.W. 668, 684 (Mich. 1919).

  43. 43.

    Id.

  44. 44.

    See id.

  45. 45.

    See id.

  46. 46.

    See supra Sects. 2.3.1 and 2.3.3.

  47. 47.

    See id.

  48. 48.

    See Berle, supra note 195 in Chap. 2; for information on Berle’s arguments, see supra Sect. 2.3.

  49. 49.

    Grant Hayden & Matthew T. Bodie, Shareholder Democracy and The Curious Turn Toward Board Primacy, 51 Wm. & Mary L. Rev. 2071, 2074 (2010) (referring to Bainbridge, supra note 297, at 568–69).

  50. 50.

    See id. (referring to Lucian A. Bebchuk, The Case for Increasing Shareholder Power, 118 Harv. L. Rev. 833 (2005)).

  51. 51.

    Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986).

  52. 52.

    Id.

  53. 53.

    See, e.g., Simons v. Cogan, 549 A.2d 300, 304 (Del. 1988).

  54. 54.

    See Bainbridge, supra note 297, at 563 (“Today, most corporate law scholars embrace some variant of shareholder primacy.”); Berle, For Whom Corporate Managers are Trustees: A Note, supra note 195 in Chap. 2, at 1367 (arguing that corporations exist to enhance shareholder profit); Robert C. Clark, Corporate Law 33, 282, 682 (1986); Fairfax, supra note 263, at 676; Friedman, supra note 295295; Chen & Hanson, supra note 297, at 37 (stating the resurgence of shareholder primacy since the 1970s); Hansmann & Kraakman, supra note 297, at 440–41; Millon, supra note 297, at 230.

  55. 55.

    Friedman, supra note 295.

  56. 56.

    Eugene V. Rostow, To Whom and for What Ends is Corporate Management Responsible? in Corporation in Modern Society 46, 49–50 (Edward S. Mason ed., 1961).

  57. 57.

    Melvin Aron Eisenberg, An Overview of the Principles of Corporate Governance, 48 Bus. L. 1271, 1275 (1993) (noting that “[t]he business corporation is an instrument through which capital is assembled for the activities of producing and distributing goods and services and making investments.”).

  58. 58.

    Mark J. Roe, The Shareholder Wealth Maximization Norm and Industrial Organization, 149 U. Pa. L. Rev. 2063, 2065 (2001).

  59. 59.

    See, e.g., Lucian A. Bebchuk, Letting Shareholders Set the Rules, 119 Harv. L. Rev. 1784 (2006); Bebchuk, The Case for Increasing Shareholder Power, supra note 309.

  60. 60.

    Hansmann & Kraakman, supra note 297, at 440–41 (they also note that “noncontrolling shareholders should receive strong protection from exploitation at the hands of controlling shareholders.”); See also Robert C. Clark, Corporate Law 30 (1986) (noting that, although there are other laws affecting corporations, corporate law, by definition, deals only with the relationship between shareholders and directors and officers.).

  61. 61.

    1 Am. Law Inst., Principles of Corporate Governance: Analysis and Recommendations § 4.01(a) (1994).

  62. 62.

    See Hansmann & Kraakman, supra note 297, at 439.

  63. 63.

    Most casebooks have not provided much material on corporate social responsibility and the role of the corporation in society. Professor Greenfield criticized this phenomenon and argued that corporate law should deal with the external relationship of corporations in society. See Kent Greenfield, There’s a Forest in Those Trees: Teaching About the Role of Corporations in Society, 34 Ga. L. Rev. 1011 (2000).

  64. 64.

    See D. Gordon Smith & Cynthia A. Williams, Business Organizations: Cases, Problems, and Case Studies 501 (2d ed. 2008).

  65. 65.

    See Robert A.G. Monks & Nell Minow, Corporate Governance 109 (4th ed. 2008) (listing the distinctive interest rights of shareholders as “(1) to withdraw the interest in the corporation; (2) to vote for directors, shareholder proposals, and major organization matters; (3) to bring a derivative suit on the corporation’s behalf; (4) to access certain information of the corporation; and (5) to receive dividends, which the corporation decides to distribute at the end of the quarter, as well as residual claim status in case of corporation’s liquidation”).

  66. 66.

    See id. at 95.

  67. 67.

    See id. at 109.

  68. 68.

    See id.

  69. 69.

    See Guth v. Loft Inc., 5 A.2d 503, 510 (Del. 1939) (“Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders.”).

  70. 70.

    Berle argued that property is split into active and passive classes. See Berle, For Whom Corporate Directors Are Trustees: A Note, supra note 195 in Chap. 2, at 1370.

  71. 71.

    See id.

  72. 72.

    Lynda J. Oswald, Shareholders v. Stakeholders: Evaluating Corporate Constituency Statutes under the Takings Clause, 24 J. Corp. L. 1, 2–3 (1998).

  73. 73.

    See Millon, supra note 297, at 230–31.

  74. 74.

    See Jill E. Fishch, Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, 31 J. Corp. L. 637, 649 (2006) (noting that Thomas Grey explains, “To own property is to have exclusive control of something—to be able to use it as one wishes, to sell it, give it away, leave it idle, or destroy it.”); Thomas C. Grey, The Disintegration of Property, in NOMOS XXII 69 (J. Roland Pennock & John W. Chapman eds., 1980)).

  75. 75.

    See, e.g., Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of the Firm 12 (1991); See Lucian A. Bebchuck, The Debate on Contractual Freedom in Corporate Law, 89 Colum. L. Rev. 1395, 1397, 1408–09 (1989); See also Frank H. Easterbrook & Daniel R. Fischel, Voting in Corporate Law, 26 J.L. & Econ. 395, 403–04 (1983); Daniel R. Fischel, The Corporate Governance Movement, 35 Vand. L. Rev. 1259, 1262 (1982); Michael Jensen & William Meckling, Theory of The Firm: Managerial Behavior, Agency Costs, and Ownership Structure, 3 J. Fin. Econ. 305, 312 (1976).

  76. 76.

    See Benedict Sheehy, Scrooge—The Reluctant Stakeholder: Theoretical Problems in the Shareholder-Stakeholder Debate, 14 U. Miami Bus. L. Rev. 193, 209 (2005).

  77. 77.

    See, e.g., Jonathan R. Macey, Fiduciary Duties as Residual Claims: Obligations to Nonshareholder Constituencies from a Theory of the Firm Perspective, 84 Cornell L. Rev. 1266 (1999); Henry N. Butler, The Contractual Theory of the Corporation, 11 Geo. Mason L. Rev. 99 (1989); Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416 (1989); Barry D. Baysinger & Henry N. Butler, Anti-Takeover Amendments, Managerial Entrenchment, and the Contractual Theory of the Corporation, 71 Va. L. Rev. 1257 (1985); Easterbrook & Fischel, Voting in Corporate Law, supra note 334; Jensen & Meckling, supra note 334, at 311; William A. Klein, The Modern Business Organization: Bargaining Under Constraints, 91 Yale L.J. 1521 (1982).

  78. 78.

    See R. H. Coase, The Nature of the Firm, 4 Economica 386 (1937).

  79. 79.

    See id. at 1418.

  80. 80.

    See Macey, supra note 336, at 1266; see also Susanna Kim Ripken, Corporations Are People Too: A Multi-Dimensional Approach to the Corporate Personhood Puzzle, 15 Fordham J. Corp. & Fin. L. 97, 158 (2009).

  81. 81.

    Jensen & Meckling, supra note 334, at 311.

  82. 82.

    See Ripken, supra note 339, at 158.

  83. 83.

    Antony Page, Has Corporate Law Failed? Addressing Proposals for Reform, 107 Mich. L. Rev. 979, 984 (2009).

  84. 84.

    Id. See also Bainbridge, supra note 297 (advancing the director primacy theory, which contends that boards control corporations, and that shareholders are the appropriate beneficiaries of boards’ fiduciary duties).

  85. 85.

    See Reuven S. Avi-Yonah, The Cyclical Transformations of the Corporate Form: A Historical Perspective on Corporate Social Responsibility, 30 Del. J. Corp. L. 767, 773 (2005).

  86. 86.

    See, e.g., John Finnis, Corporate Persons II: Persons and Their Associations, in 63 Supp. Vol.: Proc. of the Aristotelian Soc’y 267 (1989); S.J. Stoljar, Groups and Entities: An Inquiry into Corporate Theory (1973); H.L.A Hart, Definition and Theory in Jurisprudence: An Inaugural Lecture (1953); Alexander Nekam, The Personality Conception of the Legal Entity (1938); Martin Wolff, On the Nature of Legal Persons, 54 L. Q. Rev. 494 (1938); Felix S. Cohen, Transcendental Nonsense and the Functional Approach, 35 Colum. L. Rev. 809 (1935); Max Radin, The Endless Problem of Corporate Personality, 32 Colum. L. Rev. 643 (1932); Frederick Hallis, Corporate Personality: A Study in Jurisprudence (1930); Paul Vinogradoff, Juridical Persons, 24 Colum. L. Rev. 594 (1924);. George F. Canfield, The Scope and Limits of the Corporate Entity Theory, 17 Colum. L. Rev. 128 (1917); Ernst Freund, The Legal Nature of Corporations (1897).

  87. 87.

    See Fischel, supra note 336, at 1273. Furthermore, the aggregate theory implies that corporate nature is biased in favor of the private interests of the individuals who create it, thus inspiring laws that support the shareholders’ interest through an antiregulatory approach. See David Millon, The Ambiguous Significance of Corporate Personhood, 2 Stan. Agora: Online J. Leg. Persp. 39, 42 (2001).

  88. 88.

    See Ripken, supra note 339, at 100.

  89. 89.

    See Avi-Yonah, supra note 344, at 773.

  90. 90.

    Ripken, supra note 339, at 100.

  91. 91.

    Id. at 100–01 (she presents the aggregate theorist’s understanding that corporations “cannot literally ‘act’ or ‘decide’ or ‘intend’ apart from their human members.”).

  92. 92.

    This view focuses on “the governance problems that arise inside the corporation” and on the “private relations between the shareholders of the corporation and management.” David Millon, Theories of the Corporation, 1990 Duke L.J. 201, 201–02 (1990).

  93. 93.

    See Fischel, supra note 75, at 1273.

  94. 94.

    See Friedman, supra note 295.

  95. 95.

    See Fischel, supra note 75, at 1273.

  96. 96.

    See Easterbrook & Fischel, Voting in Corporate Law, supra note 334, at 404; see also Macey, supra note 336, at 1273.

  97. 97.

    See supra Sect. 3.2.2.

  98. 98.

    See Robert B. Thompson, Unpacking Limited Liability: Direct and Vicarious Liability of Corporate Participants for Torts of the Enterprise, 47 Vand. L. Rev. 1, 12 (1994).

  99. 99.

    See Easterbrook & Fischel, Voting in Corporate Law, supra note 334, at 403; see Page, supra note 342, at 980.

  100. 100.

    See Easterbrook & Fischel, Voting in Corporate Law, supra note 334, at 404; see also Macey, supra note 336, at 1273.

  101. 101.

    See Frank H. Easterbrook & Fischel, supra note 334, at 36.

  102. 102.

    See Lynn A. Stout, Bad and Not-So-Bad Arguments for Shareholder Primacy, 75  1189, 1193 (2002).

  103. 103.

    See Roe, supra note 317, at 2065; D. Gordon Smith, The Shareholder Primacy Norm, 23  L. 277, 278 (1998).

  104. 104.

    See generally Bebchuk, The Case for Increasing Shareholder Power, supra note 309, at 850.

  105. 105.

    Id.

  106. 106.

    See Easterbrook & Fischel, supra note 334, at 38.

  107. 107.

    Id.

  108. 108.

    See Lewis D. Solomon & Kathleen J. Collins, Humanistic Economics: A New Model for the Corporate Social Responsibility Debate, 12 J. Corp. L. 331. 335 (1987).

  109. 109.

    See id.

  110. 110.

    Friedman, supra note 295.

  111. 111.

    On the approach espoused by some corporate scholars that directors have a responsibility to stakeholders, see Ira M. Millstein, The Accountable Corporation: A Perspective on Corporate Governance (Rules, Principles, or Both), in The Accountable Corporation, Volume 1 (Marc J. Epstein & Kirk O. Hanson, eds., 2005); Adrian Cadbury, The Rise of Corporate Governance in The Accountable Corporation, Volume 1 (Marc J. Epstein & Kirk O. Hanson, eds., 2005). For examples on new approaches of corporate managers, see The Economist articles presented in January 2005 claiming that the stakeholder assessment model had begun to eclipse the shareholder primacy norm. The Ethics of Business, Economist, Jan. 22, 2005; The Good Company, Economist, Jan. 22, 2005; The Good Company: Capitalism and Ethics, Economist, Jan. 22, 2005; The World According to CSR, Economist, Jan. 22, 2005; Profit and the Public Good, Economist, Jan. 22, 2005.

  112. 112.

    Brian Grow, The Debate Over Doing Good, Bus. Wk., August 15, 2005.

  113. 113.

    See Margaret M. Blair & Lynn A. Stout, Director Accountability and the Mediating Role of the Corporate Board, 79 Wash. U. L.Q. 403, 406 (2001); Timothy L. Fort, The Corporation as Mediating Institution: An Efficacious Synthesis of Stakeholder Theory and Corporate Constituency Statutes, 73 Notre Dame L. Rev. 173, 184–86 (1997); William W. Bratton, The Economic Structure of the Post-Contractual Corporation, 87 Nw. U.L. Rev. 180, 208–15 (1992).

  114. 114.

    See Fairfax, supra note 263, at 677.

  115. 115.

    See id.

  116. 116.

    Id. at 680 (“To that end, this theory reflects the notion that corporations should devote resources to social and environmental issues that affect the broader (even global) society, while refraining from practices that have a negative impact on such issues.”).

  117. 117.

    See, e.g., J. Mark Ramseyer, Corporate Law 503 (Peter Newman ed., 1998) (“Corporate law governs the internal affairs of the corporation…the ties among a firm’s shareholders and its senior managers—its officers and directors.”).

  118. 118.

    See Wells, supra note 199, in Chap. 2, at 78.

  119. 119.

    See Fairfax, supra note 263, at 680 (“Indeed, such a conception does not advocate that corporate entities should be converted into non-profits whose sole responsibility is to dedicate resources to external groups.”).

  120. 120.

    See id (“In this respect, many critics of the stakeholder theory misconceive this approach as an attempt to completely subordinate a corporation’s profit-making concerns.”).

  121. 121.

    Burwell v. Hobby Lobby Stores, 573 U.S. ___ (2014), 134 S. Ct. 2751, WL 2921709.

  122. 122.

    See Berle, Corporate Powers as Powers in Trust, supra note 195 in Chap. 2; Berle, For Whom Corporate Managers Are Trustees: A Note, supra note 195 in Chap. 2; Dodd, supra note 139 in Chap. 2.

  123. 123.

    See Wells, supra note 199, in Chap. 2, at 111.

  124. 124.

    See supra Sect. 3.2.1.

  125. 125.

    See Wells, supra note 199, in Chap. 2, at 128–30.

  126. 126.

    The Good Company: Capitalism and Ethics, Economist, January 22, 2005.

  127. 127.

    Grow, supra note 371.

  128. 128.

    See Ronald Chen & Jon Hanson, The Illusion of Law: The Legitimating Schemas of Modern Policy and Corporate Law, 103 Mich. L. Rev. 1, 38–39 (2004).

  129. 129.

    See Collingsworth, supra note 295, at 670–71.

  130. 130.

    See Pitts, supra note 295, at 334.

  131. 131.

    See Fishch, supra note 333, at 649.

  132. 132.

    See, e.g., Margaret M. Blair, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century 4–5 (1995).

  133. 133.

    See, e.g., id.

  134. 134.

    See Fishch, supra note 333, at 649.

  135. 135.

    See Stout, Bad and Not-So-Bad Arguments for Shareholder Primacy, supra note 361, at 1191.

  136. 136.

    See Fishch, supra note 333, at 650.

  137. 137.

    See id.

  138. 138.

    See Eugene F. Fama, Agency Problems and the Theory of the Firm, 88 J. Pol. Econ. 288, 289–90 (1980); for information about contractarian theory, see supra Sect. 3.2.2.

  139. 139.

    See id; see also Lynne L. Dallas, Two Models of Corporate Governance: Beyond Berle & Means, 22 U. Mich. J.L. Ref. 19, 23 (1988) (noting that ownership of the firm does not exist under this model “because no one can own a ‘nexus.’”).

  140. 140.

    See Fama, supra note 397, at 289–90.

  141. 141.

    See Fishch, supra note 333, at 648–50; for further discussion on property rights, see Allen, supra note 263.

  142. 142.

    See Bainbridge, supra note 297, at 564–65.

  143. 143.

    See Stephen M. Bainbridge, Corporation Law and Economics 20–23 (2002); David L. Engel, An Approach to Corporate Social Responsibility, 32 Stan. L. Rev. 1, 34–35 (1979).

  144. 144.

    See Jonathan R. Macey, Fiduciary Duties as Residual Claims: Obligations to Nonshareholder Constituencies from a Theory of the Firm Perspective, 84 Cornell L. Rev. 1266, 1267–68 (1999).

  145. 145.

    See, e.g., Fischel, supra note 336, at 1268–73.

  146. 146.

    See Kenneth J. Arrow, Social Responsibility and Economic Efficiency, 21 Pub. Pol’y 303, 304–05 (1973).

  147. 147.

    See Engel, supra note 402, at 29–34.

  148. 148.

    For an affirmative view, see Patrick W. Duff, Personality in Roman Private Law (1938); for a negative view, see Fritz Schultz, Classical Roman Law 88–102 (1951), and Otto Gierke, Associations and Law: The Classical and Early Christian Stages 128–31 (1977).

  149. 149.

    See Avi-Yonah, supra note 344, at 782.

  150. 150.

    See id.

  151. 151.

    See Morton J. Horwitz, Santa Clara Revisited: The Development of Corporate Theory, 88 W. Va. L. Rev. 173 (1985).

  152. 152.

    See Avi-Yonah, supra note 344, at 773.

  153. 153.

    See supra Sect. 3.2.2.

  154. 154.

    See Avi-Yonah, supra note 344, at 782.

  155. 155.

    See Jess M. Krannich, The Corporate “Person”: A New Analytical Approach to a Flawed Method of Constitutional Interpretation, 37 Loy. U. Chi. L.J. 61, 80 (2005).

  156. 156.

    Adolf A. Berle, Jr. & Gardiner C. Means, The Modern Corporation and Private Property 112–25 (1932).

  157. 157.

    Bainbridge, supra note 402, at 25.

  158. 158.

    Model Bus. Corp. Act § 3.02.

  159. 159.

    See Avi-Yonah, supra note 344.

  160. 160.

    See Stout, Bad and Not-So-Bad Arguments for Shareholder Primacy, supra note 361, at 1193.

  161. 161.

    Jonathan R. Macey, An Economic Analysis of the Various Rationales for Making Shareholders the Exclusive Beneficiaries of Corporate Fiduciary Duties, 21 Stetson L. Rev. 23, 31–36 (1991)

  162. 162.

    See Kent Greenfield, The Place of Workers in Corporate Law, 39 B.C. L. Rev. 283, 303 (1998).

  163. 163.

    See id. at 304.

  164. 164.

    See Amir N. Licht, The Maximands of Corporate Governance: A Theory of Values and Cognitive Style, 29 Del. J. Corp. L. 649, 652 (2004).

  165. 165.

    See id. at 653.

  166. 166.

    See id.

  167. 167.

    See Blair & Stout, supra note 197 in Chap. 2, at 417.

  168. 168.

    See Del. Code Ann. tit. 8, Sec. § 170(a) 2001 (providing circumstances under which directors of corporations may declare dividends).

  169. 169.

    “Agency costs” are expenditures accrued to mitigate the problems incurred in the course of using an agent in business. See Roe, supra note 317, at 2065; Smith, supra note 362, at 278. See supra Sect. 3.2.2.

  170. 170.

    See Mark Kelman, Misunderstanding Social Life: A Critique of the Core Premises of “Law and Economics,” 33 J. Legal Educ. 274 (1983).

  171. 171.

    See id.

  172. 172.

    See Roe, supra note 317, at 2065; Smith, supra note 362, at 278.

  173. 173.

    See Stout, Bad and Not-So-Bad Arguments for Shareholder Primacy, supra note 361, at 1199.

  174. 174.

    See id.

  175. 175.

    See supra Sect. 3.2.2.

  176. 176.

    See Am. Law Inst., § 2.01 n.2, cmt. f.

  177. 177.

    See Theodora Holding Corp. v. Henderson, 257 A.2d 398, 405 (Del. Ch. 1969); Shensky v. Wrigley, 237 N.E.2d 776, 779 (Ill. App. Ct. 1968).

  178. 178.

    For the information on constituency statutes, see infra Sect. 4.1.4.

  179. 179.

    See Einer Elhauge, Sacrificing Corporate Profits in the Public Interest, 80 N.Y.U. L. Rev. 733, 771–13 (2005).

  180. 180.

    Ian B. Lee, Corporate Law, Profit Maximization, and the “Responsible” Shareholder, 10 Stan. J.L. Bus. & Fin. 31, 35 (2005).

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    Jeehye You

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You, J. (2015). American Theoretical Debates over CSR . In: Legal Perspectives on Corporate Social Responsibility. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2386-3_3

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