Academic journal article Washington and Lee Law Review

On the Frontier of Capitalism: Implementation of Humanomics by Modern Publicly Held Corporations: A Critical Assessment

Academic journal article Washington and Lee Law Review

On the Frontier of Capitalism: Implementation of Humanomics by Modern Publicly Held Corporations: A Critical Assessment

Article excerpt

LEWIS D. SOLOMON*

Corporations which exist solely to maximize profit become disconnected from their soul--the spiritual interconnectedness of humanity. Like individuals, businesses can conduct themselves with the knowledge that the hearts, souls, and spirits of all people are interconnected; so that as we help others, we cannot help helping ourselves.

... It makes no sense to compartmentalize our lives--to be cutthroat in business, and then volunteer some time or donate some money to charity. For it is business that is the most powerful force in our society....

... So, if business is the most powerful force in the world, it stands to reason that business sets the tone for our society.

BEN COHEN, BEN & JERRY'S HOMEMADE, INC. 1990 ANNUAL REPORT 2 (1991)

I see business as a Renaissance concept, where the human spirit comes into play. ... It can be something that people genuinely feel good about, but only if it remains a human enterprise.

... I still believe that enlightened capitalism is the best way of changing society for the better.

ANITA RODDICK, BODY AND SOUL 22, 27 (1991)

I. INTRODUCTION

Critics maintain that for-profit, business corporations should be more "responsible," that they should take account of all constituencies affected by their operations and should even assume responsibility for broader societal problems that they may impact only tangentially. Defenders of a narrower set of corporate goals and constituent interests argue that corporations should be concerned exclusively with maximizing the profits they can earn for shareholders within the law. This controversy regarding corporate goals and stakeholder interests has spanned most of the twentieth century.

In the early 1930s, two leading corporate law scholars, Adolf A. Berle and E. Merrick Dodd, debated the role of the corporation. Berle's view was that corporate powers were held in trust and were "at all times exercisable only for the ratable benefit of all the shareholders. ..."(1) Dodd's thesis was that the business corporation was properly seen "as an economic institution which has a social service as well as a profit-making function. ..."(2)

Twenty years later, the New Jersey Supreme Court seemed to vindicate both points of view. In a leading case,(3) the court upheld as valid a corporate charitable contribution to Princeton University, on the grounds that the gift at least arguably advanced the donor corporation's long-run business interests. But as Berle later astutely observed, the effect of the discussion was to recognize that "modern directors are not limited to running business enterprise for maximum profit, but are in fact and recognized in law as administrators of a community system."(4)

However, Professor Dodd's "managerialism" view, because it treats corporate managers as professionals whose duties require the exercise of almost statesmanlike responsibility, has come under attack, most notably by Milton Friedman. In Capitalism and Freedom, Friedman asserts that corporate officers' sole obligation is to maximize long-run profits "so long as [they] stay within the rules of the game."(5) It remains unclear whether Friedman merely wants corporate managers to stay within the law, or whether his use of the phrase "rules of the game" refers to some broader obligations. Beyond this linguistic quagmire, Friedman has come to represent the view that the social responsibility of corporations is to make increasing profits for their shareholders and that business-funded programs designed to redress social ills represent theft from corporate shareholders.

Today in the Anglo-American legal system, corporations have considerable flexibility in undertaking socially responsible activities. While retaining the profit maximization goal of free market economists, the more moderate and flexible model considers the time frame for assessing profitability to encompass long-term corporate profit and shareholder gain, and also enlarges the scope of corporate conduct. …

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