Ofer Eldar is an associate professor at the Duke University School of Law. This post is based on his recent article, forthcoming in the Virginia Law Review.
In recent years, there have been efforts to encourage firms to pursue social goals. This imperative, however, is very vague. What range of permissible non-pecuniary goals should companies be encouraged to pursue? This question reflects a much re-hashed debate regarding the role and purpose of corporations. Many studies view this topic as a matter of corporate governance. That is, the key question is whether policies that seek to create social impact—often referred to as “CSR” (for corporate social responsibility)—maximize shareholder value in the long term. If the answer is yes, then it is a win-win situation for all because such policies are assumed to benefit society.
In a new article, Designing Business Forms to Pursue Social Goals (forthcoming, Virginia Law Review), I argue that rather than focusing on shareholder value, the pressing question should be, “Does the pursuit of social missions by for-profits actually benefit the intended beneficiaries?” Even if CSR policies are associated with shareholder value, it does not follow that they achieve their putative purpose of helping stakeholders and society at large. Without a mechanism for ensuring that CSR actually benefits the stakeholders, companies can easily use it to enhance their reputations and increase their profits, without providing tangible public benefits.
