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- Title
CSR STATEMENTS: INCENTIVES AND ENFORCEMENT IN THE WAKE OF THE BUSINESS ROUNDTABLE'S STATEMENT ON CORPORATE PURPOSE.
- Authors
Sigel, Arielle
- Abstract
Corporate social responsibility ("CSR") statements--voluntary statements made by a corporation to improve its practices in three broad areas: environmental, social, and governance ("ESG")--are increasingly expected from companies. Both consumers and investors are interested in whether companies are making efforts at social responsibility. In 2019, the Business Roundtable's statement focused on CSR, emphasizing corporations' commitment to stakeholders as well as shareholders. This statement signaled a broader shift away from for-profit companies' profitability focus, and other prominent industry figures, such as BlackRock's Larry Fink, continue to voice similar sentiments. The business judgment rule and related corporate law doctrines and cases, such as Dodge v. Ford, provide directors with a great deal of deference--within limits, of course--to make decisions that do not fulfill their primary duty of profit maximization. While CSR statements help companies by providing brand recognition, meeting consumer demand, and creating social good, these companies' decisions to pursue CSR goals do not always align directly with maximizing profits. This creates a rift between directors' and companies' legal obligations and the trend of CSR and stakeholder theory. This Note seeks to close this rift by exploring the incentives behind CSR statements and explaining how directors can fulfill their duties by linking CSR statements to profits. In doing so, it concludes that CSR is a proper corporate purpose. CSR statements, with certain conditions placed on them, benefit both companies and society. If companies get to reap the reputational and financial benefits from making CSR statements, then companies must make good faith efforts to achieve their stated goals. This Note argues that, in general, incentivizing adherence to CSR statements through liability is difficult and disadvantageous. However, if liability is to be imposed, this Note presents a specific liability threshold to encourage desirable and effective CSR statements. This framework would allow shareholders to sue the company or its directors for failing to meet CSR goals only if the company made a bad-faith CSR statement, made no effort to meet the statement, or lied about something in the statement. In addition, CSR statements may be incentivized and enforced through alternative solutions to liability, such as applying deference to for-profit corporations comparable to that applied to benefit corporations, increasing voluntary reporting, and treating CSR statements similar to forward-looking statements in securities law.
- Subjects
UNITED States; SOCIAL responsibility of business; CORPORATION law; SOCIAL responsibility of business -- Law &; legislation; COMMERCIAL law; RESPONSIBILITY -- Law &; legislation
- Publication
Boston University Law Review, 2021, Vol 101, Issue 2, p803
- ISSN
0006-8047
- Publication type
Article