Content area
Full Text
Introduction
This Article explores the relationship between shareholder ethical responsibility and corporate law. Shareholder responsibility is a neglected aspect of the debate about corporate social responsibility. In that debate, conservatives defend the view that corporate law obligates management to pursue stockholders' profit without regard to ethical considerations or social responsibility except insofar as the latter might affect profits. Even some critics of profit maximization concede the accuracy of the conservatives' description of management's corporate law duties, and blame those duties for corporations' antisocial behavior. The truth is, however, that corporate law does not preclude the independent consideration of ethics or social responsibility. In this Article, I argue that if the critics are correct that corporate power is used unethically and irresponsibly in the pursuit of greater profits, it is not so much because of corporate law as because of the self-interest and inertia of shareholders, for whom the maximization of their profits is congenial.
The "responsible" shareholder is therefore important because with such shareholders, rather than with corporate managers alone, rests any hope one might have for greater corporate social responsibility.
Curiously, however, many academic corporate lawyers are dismissive or suspicious of the notion of ethical investment decision-making, by which I mean the making of investment decisions at least partly on the basis of considerations other than profit or other self-interested objectives. Ethical investment decision-making is, I argue, unimpeachable from the standpoint of the conception of the corporation that now predominates in the corporate law academy-the view that the corporation is best thought of as a "nexus of contracts" among the various participants. However, ethical investors are awkward for those academic corporate lawyers who subscribe to the view that corporations should be managed exclusively with a view to the maximization of stockholder profits, a normative position not entailed by the "nexus of contracts" conception. In this Article, I suggest that it is misguided to respond to this tension, as some prominent theorists of the corporation have done, by disparaging ethical investment decision-making.
The Article is organized as follows. In Part I, I outline the debate concerning the legality and desirability of corporate social responsibility and discuss the underlying theoretical framework. In Part II, I articulate the view that shareholders have a degree of responsibility...