The failure to constrain corporate social injury : the state, the stakeholder and the fiduciary

Abstract

Business enterprises evolved from small private companies into largely independent, semi-sovereign publicly traded corporations, unrestrained by national and state governments and civil society. This resulted in excessive individual and corporate materialistic self-interest causing widespread social injury. In the mid-to-late twentieth century, institutional investors developed a self-regulatory methodology, specifically designed to identify and resolve corporate social injury based upon recognizing a minimum moral obligation. It failed. By the twenty-first century, large financial corporations dominated the U.S. financial sector and much of the economy by deregulating markets and controlling governments by lobbying and making political contributions. In 2008, a financial crisis erupted and global markets almost collapsed. This resulted in an attempt by the U.S. Congress and government regulators to constrain corporate power. This also largely failed. This dissertation argues that corporate directors, as fiduciaries, have legal obligations to act in the best interests of all stakeholders, including shareholders, and have the legal flexibility and independence to consider stakeholder concerns acting on behalf of the best interests of the corporation and civil society. Unless man acting in his capacity as a fiduciary cannot balance his and the corporation's excessive materialistic self-interest with the morality of obligation to serve civil society, then the state and stakeholder must compel such a balance. This dissertation argues that without major structural and legal change by government and stakeholders, including civil society, corporations will continue to remain unrestrained, engage in socially injurious conduct and once again large financial institutions may endanger U.S. economic stability.