44 Law Professors Make A Case Against Corporate Social Responsibility


I was completely nonplussed when I saw this brief filed by 44 law professors in the appeal now pending before the U.S. Supreme Court in Sebelius v. Hobby Lobby Stores, Inc., Case No. 13-354.  I was shocked because the brief constitutes a frontal assault on the corporate social responsibility.

For example, the law professors make the following apocalyptic claim:

If this Court were to agree that, as a matter of federal law, shareholders holding a control bloc of shares in a corporation may essentially transfer their [social responsibility] beliefs to the corporation, the results could be overwhelming.

Ok, I substituted “social responsibility” for “religious”.   However, if the transfer of stockholder religious beliefs to the corporation would be “overwhelming”, why wouldn’t the same be true of beliefs regarding climate change, the environment, or other beliefs animating the corporate social responsibility movement?

Here are some more examples of how simply substituting “social responsibility” in the law professors’ brief converts the brief into an apology for eschewing corporate social responsibility:

State courts, too, could become clogged with business disputes between shareholders who disagree over what [social responsibility] identity, if any, their corporation should adopt.

Rather than embracing a rule that says that shareholders claiming control of a corporation can impose their personal [social responsibility] beliefs on minority (or even majority) shareholders and employees, the Court should reject the values pass-through theory.

Of course, the law and the real world belie the professors’ assertions.  As I’ve pointed out, California has explicitly permitted the formation of nonprofit religious corporations for decades.  While disputes have arisen from time to time, the California courts have not been ”clogged” with these cases.  As I’ve also pointed out, the adoption of so-called “other constituency statutes” by many states (but not California) allows boards to consider broad interests, including those of the community and society.  Finally, even a cursory sampling of shareholder proposals reveals that a great many are explicit attempts by the proponents to impose their beliefs on the corporation.   However, I’d be surprised if any of these 44 professors is willing to opine that the proposal motivated by shareholder beliefs are excludable under Rule 14a-8 as violating state law.

If corporations can’t have religious beliefs, then it follows that they can’t believe in climate change, sustainable investment or any other beliefs embraced by the corporate social responsibility movement.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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