This reading essay is a review of the following article: Bratton, W.W. & Wachter, M.L. (2008). Shareholder primacy's corporist origins: Adolf Berle and the modern corporation. Journal of Corporation Law, 34 (1): 99-152. The thesis of the aforementioned article regarding corporate law theories is that "...shareholder primacy prevails today as the dominant view, with management discretion advocates in the minority, and with advocates of corporate social responsibility (CSR) as a rearguard" (pg. 100). Bratton & Wachter discuss the three views throughout the article and clarifies errors in early interpretations of Adolf A. Berle, Jr. and E. Merrick Dodd's debate of the 1930's. Bratton & Wachter cite the early interpretations were of Berle as the grandfather of shareholder primacy and Dodd as the grandfather of CSR whereas "neither was supporting either position. Both were speaking to the politics of their day, defending different visions of the emerging corporatist state, Berle's on the left and Dodd's on the right (pg. 135)." The misunderstanding reportedly is fueled by the overlapping publishment of arguments as well as Berle's initial response to Dodd's countering views being difficult to decipher. Berle, in 1931, published his belief that corporations were drivers for advancing and protecting shareholder's interests. Therefore, he argued that corporate law should be interpreted in the same light. A year later, and again in 1935, Dodd argued that corporate leaders actually entrusted managers to consider social responsibility when making business decisions. He explained that "social responsibility" meant that corporate managers acknowledged and respected the needs of their customers and employees and that by invest... ... middle of paper ... ... very passionate (one way or another) regarding the government imposing regulations on an individual's healthcare options. Although I believe my company has gone above and beyond the minimum governmental requirements and are offering unbeatable prices with great coverage as well as free comparison assistance, others believe my company is just part of the problem. Insurance companies have a long history of poor public perception and are viewed as focused only on shareholder success yet that has not been my experience as an employee and member. Therefore, I believe it is my duty to educate others on the many ways my company positively contributes to society and is committed to all shareholders not solely its financial beneficiaries. I believe my company is attempting to achieve a balanced application of corporate law with political, economical and societal sensitivity.
...Foundational Considerations in the Corporate Social Responsibility Debate’, Business Horizons, vol. 34, no. 4, pp. 9-18.
Blair, Margaret M. (1995) Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century. Washington, DC: Brookings.
Lazonick, W., & O'Sullivan, M. (2000). Maximizing shareholder value: a new ideology for corporate governance. Economy and Society, 29(1), 13-35. Retrieved from http://www.uml.edu/centers/cic/Research/Lazonick_Research/Older_Research/Business_Institutions/maximizing shareholder value.pdf
Does the maximaization of shareholder value reward socially destructive actions by corporations?Certainly not.A company is not an instrument of shareholders, but a coalition between various resource suppliers, with the intention of increasing their common wealth and hence is contradictory to Mr Al Dunlaps view of share holder primancy.
To supply the wants and needs of a consumer, society entrusts wealth-producing resources to the business enterprise.” (Santayana, George. Is The Tyranny Of Shareholder Value Finally Ending? So before we go into greater detail on the different perspectives related to social responsibility, one might question the meaning of social responsibility. It is generally agreed that social responsibility is defined as the business obligation to make decisions that benefit society.... ...
This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees, customers, local community and the suppliers (Freeman 1984 pp. 409–421).
Friedman, M. (1970). The Social Responsibility of Business is to make Profit. New York Times
In effect Salomon's principle as confirmed by Macaura v Northern Assurance Co. and Lee v Lee's Air Farming Ltd. helps form an image of a corporation as a 'depersonalised conception'[5], an object that is 'cleansed and emptied of its shareholders. '[6] Yet the concept of an incorporated company as a separate legal person causes some difficulties, for surely all 'legal personality is in a sense fiction'.[7] Questions soon arise ... ... middle of paper ... ...
The article “The Social Responsibility of Business is to Increase its Profits” is written by a famous economist Milton Friedman. Friedman in this article implies that shareholders are the main drivers of the corporations and he believes that it is to them corporations must be socially responsible to. The goal of any corporation is to maximize profits and return the portion of these profits to shareholders for investing in the corporation. The shareholders can themselves decide which social causes to take part in rather than assigning a corporate executive to decide on their behalf. Friedman argues that a corporation must have no social responsibility to society because its only concern is the increase profits for itself and its shareholders.
Covey & Brown (2001) “the role of business in society has progressed over the years, from being primarily concerned with profit for sharehold¬ers to a stakeholder and community approach with a focus on corporate social responsibility”
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
When the problem became serious two main views formed: the “narrow” view and the “broader” view, based on different ideas. The “narrow” view is based on the proposition that corporations have no social responsibility and they have only one main purpose, to make a profit (Friedman, 1970). So corporations should remain socially independent and all conflicts must be solved through the individual responsibility concept. On the contrary the “broader” view states that corporations have social obligations as all existing participants of market, persons and entities are tied together and are mutually dependent. So corporations cannot ignore some serious events or problems, which take place, and must help society, as profit is not their single purpose.
It seems obvious that large corporations have a tendency to ignore the negative effects of their actions in favor of profit. This example, although sensationalized, still says to me that with power comes responsibility. It affirmed my belief that a corporation’s goal cannot be just to provide profit to shareholders, but there must also be an element of social responsibility.
Corporations that place an importance on corporate social responsibility usually have an easier experience when dealing with politicians and government regulators. In compare, businesses that present an irresponsible disregard for social responsibility tend to find themselves fending off various reviews and probes, often brought on at the assertion of public service organizations. The more positive the public insight is that a corporation takes social responsibility seriously; the less likely it is that innovative groups will launch public campaigns and claim government inquiries against it.