The White Rabbit Manifesto Chapter 8 "I Know Nothing: Aces & 8s"
DICTIONARY OF ECONOMICS AND BUSINESS
Laissez faire, laissez passer. French for "let things go ahead, let them occur." No governmental interference in the economy. The term was developed in the 18th century particularly by those opposed to mercantilism (q.v.)
Mercantilism. A political and economic theory that precious metals are the most important form of wealth and that an excess of exports over imports is the way of increasing the supply of these metals held by a country. Achievement of this end would require public control of exports, imports, prices, wages, etc.
Copyright 1959
SOCIAL RESPONSIBILITY OF CORPORATIONS
AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE:
ANALYSIS and RECOMMENDATIONS
(Tent. Draft 2, 1984)
Sec. 2.01 The Objective and Conduct of the Business Corporation. A business corporation should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain, except that, whether or not corporate profit and shareholder gain are thereby enhanced, the corporation, in the conduct of business
(a) is obliged, to the same extent as a natural person, to act within the boundaries set by law,
(b) may take into account ethical considerations that are reasonably regarded as appropriate to the responsible conduct of business, and
(c) may devote a reasonable amount of resources to public welfare, humanitarian, educational, and philanthropic purposes.
1. Is management entitled to balance constituencies? Debates about corporate social responsibility usually widen to involve the question of whether corporate directors and officers are to be seen as agents of the shareholders who "own" the firm, or a political brokers, in effect, who balance the interests of other constituencies as well (e.g., creditors, employees, consumers, the surrounding communities, the public's interest in the environment, etc.). Corporate managements generally prefer to see their role in these broader terms, and representative groups, such as the Business Roundtable, have denied that profit maximization should be the basic criterion by which managements should be judged. (Note how such normative statements confirm the empirical descriptions offered by the "behavioral" theorists of the firm, supra Section D, who argue that managers seek to "profit satisfice" rather than profit maximize.) Critics of this view, that corporate managements are entitled to balance the interests of non-shareholder constituencies against those of the shareholders, have a number of responses:
(a) The unelected civil servant theme. What entitles managers to determine the public interest? Are they especially skilled or sensitive at making such judgments? Is anyone? Or, are they likely to use claims that they were pursuing public goals as a rationalization for weak economic performance? Note that ALI 2.)1 (b),supra, permits managers to deviate from lawful profit maximization only to the extent justified by ethical principles that are "reasonably regarded as appropriate to the responsible conduct of business." Does this mean that there must be a societal consensus so that the manager is not acting as a private civil servant?
(b) Vagueness of social responsibility standard. Given the broad discretion accorded by law to corporate managers, many commentators believe that a clear, specific standard of accountability is necessary. Otherwise, the claim that the corporate managers are responsible to multiple constituents may make them effectively accountable to none. The orthodox position,most clearly stated in Dodge v. Ford Motor Co., 44 infra p. 990, sees managerial discretion as extending only to the choice of means, but not to the ends of business. Profit maximization is thus the mandatory end purpose of the corporation. Yet other models assume that managers are free within some limits to balance the interests of other constituencies against those of shareholders. Critics of the balancing approach respond that no meaningful system of accountability is possible unless shareholders can monitor an objective standard, such as profit maximization, but not a vaguer, more subjective, "balancing" standard, which may cloak managerial self-interest or ineptitude. To the extent that managerial performance is not subject to close monitoring (or that this process is costly), uncertainty results, and shareholders will pay less for their shares. This in turn means that the firm's cost of capital will rise, and social welfare suffers.
(c) Is there an identity of corporate and social goals? Proponents of a balancing model sometimes argue that there is no conflict in the long run between the corporation's best interests and society's. Pushed to an extreme, this sounds much like saying that "what is good for General Motors is good for the country, and vice versa."
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White Rabbit Manifesto Preludeby Race2TheBottomThesis811 views
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