Professor Bainbridge bangs a drum I’ve been beating here for some time and writes on corporate fiduciary responsibiliy, his area of academic research:
General welfare laws designed to deter corporate conduct through criminal and civil sanctions imposed on the corporation, its directors, and its senior officers are more efficient than stakeholderist tweaking of director fiduciary duties. By virtue of their inherent ambiguity, fiduciary duties are a blunt instrument. There can be no assurance that specific social ills will be addressed by the boards of the specific corporations that are creating the problematic externalities.
When you insist that corporate directors’ fiduciary responsibilities be extended to address all sort of social goods, the good of society as a whole, while absolving legislators and regulators from any responsibilities whatever, you arrive at a destination very much along the lines that we see now. Large corporations do pretty much whatever they care to, with a confidence rooted in experience that they’ll be allowed to skate on their responsibilities, small companies will either have their doors closed by regulators or close their doors themselves because they can’t compete under a set of regulations that were written with the biggest companies in mind, entrepeneurs will be discouraged from forming new companies, and regulators will look the other way at the most egregious offenses of the largest companies, not wanting to threaten their prospects for future employment.
Contrariwise, I agree with Professor Bainbridge:
The social obligation of business is to sustainably maximize long-term profits for shareholders. Nothing more. Nothing less.
that businesses whose managers can’t live up to these fiduciary responsibilities should be allowed to fail, and that regulators’ incentives should be aligned in such a way that they are more likely to satisfy their own fiduciary responsibilities.