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E-MailStavros Gadinis is the George R. Johnson Professor of Law at the University of California, Berkeley School of Law. This post is based on his working paper.
While academics debate corporate purpose and politicians fight over “woke capitalism,” something remarkable is happening on the ground in corporate America. Companies are quietly recognizing a fundamental truth: business decisions and social considerations are no longer separable. From healthcare pricing to content moderation, from supply chain ethics to AI development, social dimensions are embedded in core operational choices. Rather than treating these as peripheral concerns, forward-thinking companies are investing significant resources to develop sophisticated frameworks for navigating these challenges systematically.
This evolution represents far more than traditional compliance programs or feel-good corporate social responsibility initiatives. Companies are creating entirely new decision-making technologies that operate through three distinct but interconnected functions: establishing clear principles through corporate rulemaking, implementing strategic choices through executive action, and ensuring consistent application through systematic monitoring.
A New Framework for Corporate Governance
Corporate rulemaking involves creating comprehensive frameworks with general applicability across the organization. When Salesforce developed its Sustainability Exhibit—contractual terms requiring all suppliers to disclose emissions and set science-based reduction targets—it wasn’t just making a procurement decision. The company was establishing binding rules that would govern thousands of future relationships. Similarly, when Apple sets App Store policies mandating standardized rules for developers, these frameworks transcend individual transactions to create new normative orders for entire ecosystems.
Executive action translates principles into concrete reality through specific decisions and strategic initiatives. This isn’t about making statements but about demonstrating genuine commitment through measurable actions. Consider Uber’s groundbreaking decision to publicly disclose safety incidents, including sexual assault data—a counterintuitive move that required developing victim-centered reporting protocols and training programs. Or Microsoft’s choice to decline deploying facial recognition technology for police body cameras despite market opportunities, a decision that emerged from rigorous review processes weighing technical limitations against societal implications.
Monitoring functions ensure that principles translate into practice through sophisticated oversight systems. These go far beyond basic legal compliance to track progress across complex social metrics. Companies now deploy automated monitoring tools, specialized compliance teams, and multi-tiered review processes. They’re building internal bureaucracies staffed with ethicists, engineers, and policy experts who have real authority to shape corporate decisions—like Microsoft’s Office of Responsible AI, which employs over 400 professionals dedicated to ensuring ethical AI development.
Case Studies in Action
My research reveals how these governance innovations operate in practice through detailed case studies of corporate climate action and AI governance. The climate case study traces how companies pioneered emissions measurement protocols that transformed environmental reporting from vague promises to verifiable metrics. What began as BP’s internal carbon trading system evolved into the Greenhouse Gas Protocol—now used by over 90% of Fortune 500 companies that report emissions. This wasn’t just about measuring carbon; it was about creating an entirely new infrastructure for corporate accountability.
The AI governance case study examines how Microsoft built one of the tech industry’s most comprehensive ethical AI frameworks. Starting in 2016, well before AI ethics became a public concern, the company developed a systematic approach combining high-level principles with practical implementation tools. Their Sensitive Uses process has reviewed over 900 AI applications, with cases escalating from local AI Champions to specialized working groups and ultimately to the CEO for the most challenging decisions. This represents a fundamental shift from reactive compliance to proactive governance.
Both cases demonstrate how companies have moved beyond ad hoc responses to develop structured, systematic approaches for addressing social challenges that are inseparable from their core business operations. These aren’t peripheral initiatives but integral components of how modern corporations function.
A Revolution in Decision-Making Technique
What we’re witnessing is a revolution in corporate decision-making technique—similar to what we saw with the introduction of fairness opinions in the 1980s or independent audit committees in the 1990s. Just as those innovations became essential tools that courts recognized and incorporated into corporate law doctrine, these new governance mechanisms represent the next evolution in how companies make complex decisions.
Corporate law needs to evolve accordingly. I propose that courts should formally recognize boards’ essential role across all three governance functions, just as they previously adapted to recognize fairness opinions and independent committees. This doesn’t mean mandating specific outcomes or political stances. Rather, it means establishing that when social challenges fundamentally affect corporate direction, boards should demonstrate they’ve established systematic governance responses.
Courts could then evaluate whether boards followed appropriate decision-making processes—examining if they established clear frameworks, engaged relevant expertise, and implemented robust monitoring systems—while preserving traditional business judgment deference over ultimate choices. This approach would provide concrete guidance for judicial review without second-guessing the substance of business decisions.
The stakes are too high—for companies, stakeholders, and society—to let this evolution proceed without appropriate legal frameworks. We need to bring this transformation to light and integrate these governance innovations into corporate law. The future lies not in abstract debates about corporate purpose but in understanding and institutionalizing how companies systematically address the social challenges that are now inseparable from business success.
This blog post is based on my forthcoming article “Social Business Judgment,” which presents detailed case studies and doctrinal proposals for recognizing these governance innovations in corporate law.
