Incorporating Social Activism

Tom C.W. Lin is Professor of Law at the Temple University Beasley School of Law. This post is based on a recent article by Professor Lin, forthcoming in the Boston University Law Review. Related research from the Program on Corporate Governance includes Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here) and Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here).

Corporations and their executives are at the forefront of some of the most contentious and important social issues of our time. Through pronouncements, policies, boycotts, sponsorships, lobbying, and fundraising, corporations are actively engaged in issues like immigration reform, gun regulation, racial justice, gender equality, and religious freedom. This is the new reality of business and social activism in America.

My recent article, Incorporating Social Activism, in the Boston University Law Review examines this new corporate social activism and its wide-ranging effects on law, business, and society. It investigates why corporations are engaged in social activism today, reveals the legal and policy developments that have fueled unprecedented contemporary corporate social activism, analyzes potential promises and perils, and offers pragmatic proposals to address important implications for law, business, and society.

The ascent of new corporate social activism is due in large part to a confluence of three larger, interconnected changes in business, law, and society. More specifically, the convergence of government and private enterprise, the maturation of corporate social responsibility efforts, and the expansion of corporate political rights have all advanced the growth of contemporary corporate social activism. Each of these factors is interrelated and reinforcing. Collectively, they have created fertile conditions for corporations and social activists to engage one another on some of the large, pressing issues confronting contemporary society leading to a new form of corporate social activism.

Contemporary corporate social activism is quite different than that of past eras, largely due to the emergence of new information technology and changes in social expectations about corporate behavior. First, new information technology can marshal millions of people to act on an issue, and place significant and direct pressure on businesses. In past times, corporate executives feared a bad newspaper story; today, they dread a bad viral video or negative trending hashtag that can hurt their brands or stock prices exponentially more than a bad newspaper story. Furthermore, the spotlight generated by these new methods attracts the attention of policymakers and regulators, who in turn place additional pressure on businesses. The broad reach and deep impact of social activism powered by new information technology means that businesses are frequently engaged in social issues whether they want to be or not. Second, changes in social expectations about corporate behavior have also altered corporate social activism. Many in society and within corporations themselves now expect businesses and executives, particularly those at large public companies, to engage with the critical social issues of today. Silence and indifference are becoming less and less the norm. The days of simply ignoring social issues or writing a check are gone for many large businesses and their executives. Corporations are now frequently expected to engage in social issues through public statements, sponsorships, partnerships, and policies supporting a position or a cause.

The rise of contemporary corporate social activism presents both promising opportunities as well as perilous pitfalls. This new corporate social activism, thoughtfully conducted, can change society for the better, while simultaneously creating greater returns for shareholders. At the same time, such activism, heedlessly conducted, can also have corrosive effects for law, business, and society. Contemporary corporate social activism offers the promise of simultaneously improving both social value and shareholder value. In particular, corporate social activism could broaden and deepen the impact of activism, improve efficiencies of activism, and enhance corporate value. At the same time, while the rise of corporate social activism in contemporary society presents incredible opportunities for social change, legal reform, and policymaking, this ascendency also poses perilous pitfalls for businesses, activists, and society. Specifically, this rise could further politicize an already balkanized marketplace, marginalize important social issues, and corrode core democratic values and institutions.

In sum, the emergence and evolution of contemporary corporate social activism is one of the most consequential recent developments for businesses, law, and society, and will remain so for years to come. While corporations are not selfless entities that cause no social harm, corporate power, expertise, and resources can help lighten the heavy burdens confronting society. Many of the social challenges of our time are simply too important, too large, and too complex to be left to governments and nonprofits to face alone. The conflicts and collaborations between and amongst businesses and activists will present some of the most fruitful opportunities and dangerous obstacles for meaningful social progress in our time. Every business executive, social activist, public official, and ordinary citizen will be directly or indirectly affected by contemporary corporate social activism in the near future. While one can be cautiously optimistic about the long-term prospects of contemporary corporate social activism, one should also appreciate the potential corrosive effects that such activism can have on our politics, our markets, and our society. Ultimately, businesses have played, and can continue to play, an important role in helping to confront our society’s great challenges, consistent with the law and their profit-seeking objectives.

The complete article is available for download here.

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