The Virtuous Corporation: On Corporate Social Motivation and Law

39057-ple_19-2 reissue Sheet No. 54 Side A 04/17/2017 09:23:23 3_AZGAD-TROMER_TO PRINTER.DOCX (DO NOT DELETE) 3/13/17 1:43 PM THE VIRTUOUS CORPORATION: ON CORPORATE SOCIAL MOTIVATION AND LAW Shlomit Azgad-Tromer* Above and beyond their traditional financial roles, contemporary corporations increasingly assume a normative role, promoting social agendas. The myriad normative roles assumed by the corporation, from profit-centered corporate goodness to environmental and human rights corporate agendas and to corporate philanthropy, comprise an emerging corporate social identity. This article asks what induces corporations to pursue social agendas and provides an initial taxonomy for corporate social motivation showing that the incentives to pursue normative corporate conduct are often rooted in the business purpose itself. Central policy challenges are discussed, outlining the promise and the peril of emerging corporate social identities. * GLawFiN Research Associate, Center on Global Legal Transformation at Columbia Law School. I am grateful for generous support from the center on Global Legal Transformation at Columbia Law School, Berkeley Center for Study of Law and Society (CSLS) and the Berkeley Institute for Jewish Law and Israel Studies. Special thanks to Professor Katharina Pistor, Chief Justice Leo E. Strine Jr., and to participants in the Second Annual Business and Human Rights Scholars Conference at the University of Washington School of Law for helpful comments and advice. C M Y K 04/17/2017 09:23:23 341 39057-ple_19-2 reissue Sheet No. 54 Side A
39057-ple_19-2 reissue Sheet No. 54 Side B 04/17/2017 09:23:23 3_AZGAD-TROMER_TO PRINTER.DOCX (DO NOT DELETE) 3/13/17 1:43 PM 342 [Vol. 19:2 U. OF PENNSYLVANIA JOURNAL OF BUSINESS LAW INTRODUCTION........................................................................................... 342 I.STRATEGIC ANALYSIS OF CORPORATE SOCIAL MOTIVATION ................ 349 A. Management Values: Idiosyncratic Visions and Agency Costs ........................................................................................ 350 B. Impact and Responsible Investments....................................... 351 C. Employee Engagement ............................................................ 355 D. Marketing and Customer Relations ......................................... 357 E. Political Strategy ...................................................................... 359 II.CENTRAL POLICY CHALLENGES ............................................................ 359 A. Soft Corporate Governance ..................................................... 360 B. Corporate Social Motivation and Law ..................................... 363 C. Distributional Consequences: Corporate Legal Particularism and the CSR Tax Straddle ................................. 365 CONCLUSION .............................................................................................. 367 INTRODUCTION Above and beyond their traditional financial roles, contemporary corporations are increasingly assuming a normative role, promoting social agendas well beyond their organizational boundaries. According to 2015 sustainability reports, the normative outreach of contemporary S&P 500 corporations is growing with exuberance, notwithstanding their ultimate commitment to shareholder value. Among other social causes, American corporations now tackle chronic malnutrition and hunger, fight disease pandemics, mitigate gender inequality, and promote human rights.1
04/17/2017 09:23:23 C M Y K 39057-ple_19-2 reissue Sheet No. 54 Side B 1. See, e.g., Rita Vilk et al., Gender and Corporate Social Responsibility: Big Wins for Gender and Society?, 156 PROCEDIA - SOCIAL AND BEHAVIORAL SCIENCES 198, 198-202 (2014) (discussing the rise of corporate action in addressing gender issues); Alistair Barr, Google’s “Don’t Be Evil” Becomes Alphabet’s “Do The Right Thing”, WALL ST. J.: DIGITS (Oct. 2, 2015), http://blogs.wsj.com/digits/2015/10/02/as-google-becomes-alphabet-dont-beevil-vanishes/ [https://perma.cc/MFD3-FX7E] (discussing Alphabet Inc.’s motto “Do the Right Thing” and its corporate ancestor “Don’t be Evil”); Deepa Seetharaman & Anupreeta Das, Mark Zuckerberg and Priscilla Chan to Give 99% of Facebook Shares to Charity, WALL ST. J. (Dec. 2, 2015), http://www.wsj.com/articles/mark-zuckerberg-priscilla-chan-togive-99-of-facebook-stock-to-philanthropy-1449005878 [https://perma.cc/3Z4X-B6UP] (discussing Mark Zuckerberg and Priscila Chan’s recent pledge to create a new “foundation that would initially focus on ‘personalized learning, curing disease, connecting people and building strong communities’” with 99% of their Facebook shares); Rachel Soares et al., Gender and Corporate Social Responsibility: It’s a Matter of Sustainability, CATALYST, 2011, 1-3 (exploring the connection between corporations’ treatment of gender issues and sustainability); Citizensship 2014 Performance Summary, DISNEY 4-7, https://ditm-twdcus.storage.googleapis.com/FY14-Performance-Summary.pdf [https://perma.cc/Q9WEKPWU] (last visited Feb. 7, 2017) (summarizing Disney’s efforts to have a positive
corporate impact); Community: Creating Pathways to Opportunity, STARBUCKS, 39057-ple_19-2 reissue Sheet No. 55 Side A 04/17/2017 09:23:23 3_AZGAD-TROMER_TO PRINTER.DOCX (DO NOT DELETE) 2017] THE VIRTUOUS CORPORATION 3/13/17 1:43 PM 343 Promotion of social agendas by corporations is one of the greatest controversies of corporate law.2 This paper exclusively focuses on a narrower mission: to suggest an initial taxonomy of incentives underlying corporate social agendas. Incentive analyses for corporate social agendas may shed light on the potential merit, and possible risks, of corporate social identities, to be further explored in future works. Social values are embedded in every corporate decision. Corporations have always generated norms within their organizational boundaries, and social values are embedded in every corporate decision, from employment policies to customer service and business development.3 Yet, the social agendas assumed by contemporary corporations are open, dynamic, and diverse, stretching far beyond the corporate organizational boundaries and aiming to influence society as a whole.4 The myriad normative roles
04/17/2017 09:23:23 C M Y K 39057-ple_19-2 reissue Sheet No. 55 Side A http://www.starbucks.com/responsibility/community [https://perma.cc/WYF2-UN8Y] (last visited Jan. 26, 2017) (discussing Starbucks’ declaration of corporate conscience); Foundation and Corporate Responsibility, BRISTOL-MYERS SQUIBB, CORPORATE RESPONSIBILITY REPORT 1 (2014), http://www.bms.com/Documents/foundation/BMSCorporate-Responsibility-Report.pdf [https://perma.cc/D2RC-579F] (outlining BristolMyers Squibb’s 2014 corporate social responsibility report and its mission to fight disease); Ikea FY15 Group Sustainability Report, 22-48, IKEA http://www.ikea.com/ms/en_US/img/ad_content/2015_I (...truncated)