GoingGlobal 177shareholder-based profit maximization helps all the other partici-
pants.
Scores of organizations promote this direct approach in response
to the needs of corporate constituencies on a variety of issues, in-
cluding affirmative action, child labor, downsizing, the environment,
fair wages, privacy, sexual harassment, and the balance between work
life and family life. These organizations operate through employee
training and assistance programs, mission statements, and social re-
sponsibility audits.
Social responsibility has reached the large organizational level.
For example, Business for Social Responsibility, an organization
founded in 1992, currently has over 1,400 corporate members with
aggregate annual revenues exceeding $1 trillion and total employees
of nearly 5 million. It features household corporate names such as
AT&T, Coke, DuPont, Federal Express, Home Depot, Motorola, and
Polaroid. Significant numbers of mutual funds and other institu-
tional investors also have committed to investing only in socially
responsible enterprises. Some investors claim that investing this way
maximizes shareholder wealth.
Many corporations have followed suit and now emphasize their
social responsibility. There are well-known exemplars of the tradi-
tional left such as Body Shop and Ben & Jerry’s (taken over by Uni-
lever in early 2000 with promises to expand the social responsibility
commitments of the global consumer products giant). There are also
some surprising followers, such as Philips-Van Heusen Corporation,
which is headed by CEO Bruce Klatsky, an adviser on U.S. trade pol-
icy to the Bush and Reagan administrations. Hasbro, Reebok, and
Wal-Mart also are following this trend. This social emphasis is entirely
consistent with state laws, which mandate that directors act in the
best interests of the shareholders and the corporation as a whole.
German law takes more seriously the idea that the beneficiaries
of directors’ duties include corporate constituents other than share-
holders, yet Germany also forbids directors from acting contrary to
shareholder interests and indeed often requires them to act in the
“aggregated shareholder interest.” German corporate law—which is
fairly representative of European countries on these points—and
U.S. law therefore contemplate the protection of all corporate con-
stituencies. Both prescribe this protection by imposing on manage-
ment the fiduciary duties care and loyalty.
The duty of care requires the exercise of an informed business
judgment, which is taken to mean that directors must gather all the