Doing Well By Doing Good: Leveraging Due Care for Better, More Socially Responsible Corporate Decisionmaking

Abstract

Corporate social responsibility is a good idea that is, unfortunately, dead. The debate about the proper role of corporations has been at an impasse since it began in the 1930s, and the current financial and political climate is such that any proposal seeking to impose social obligations on businesses is destined for failure. As a result, proponents of greater corporate social responsibility have had to content themselves with the current state of corporate law: that corporate fiduciaries may - but need not - consider the interests of constituencies other than shareholders in making company decisions.

This Article breaks this long-standing impasse. By leveraging the current fiduciary duty of care, and in particular its requirement that managers make decisions on reasonably full information, I argue that corporate decisionmakers must assess and consider the impacts of their decisions on all of the firm's constituencies. This procedural requirement, I argue, will produce decisions that are not only financially better for the firm, but are often more socially responsible, as well.

Keywords: corporations, corporate governance, corporate social responsibility

JEL Classification: K22, K32, L21, M14