The debate about the purpose of corporations seems to have heated up after Larry Fink’s annual letter to the CEOs of companies in which BlackRock invests and again after the statement from the Business Roundtable. Both Fink’s letter and the Business Roundtable statement referred to global problems and how companies should embrace a greater responsibility to address them. The statement by the Business Roundtable has been perceived variously as a major shift in corporate law or as a PR exercise to prevent government regulation.
Irrespective of its motivations, while an acknowledgement that a consideration of stakeholder interests is useful, an invitation for government to require actions by companies to address these world problems would be problematic. As Professor Jeffrey Gordon posted here on this blog, it is the government’s responsibility to address these problems via taxation and redistribution as well as regulation in areas other than corporate law. Although Professor Tim Wu argued here that this amounts to passing the buck to government, a situation where we allow the government to require companies to perform public duties would amount to the government passing the buck to corporations. The example of India’s CSR law provides a cautionary tale.
Kindly read the whole thing.
