Professor Bainbridge...on law, politics, religion, culture & food

There Still is Nothing New Under the CSR Sun

Dave Hoffman thinks he’s found something new in the corporate social responsibility debate:

Recently, I’ve read several articles and book chapters asserting that corporate law places undue emphasis on Dodge v. Ford. Dodge is traditionally understood to hold that corporations have a exclusive duty to maximize shareholder welfare. The basic argument runs as follows. Courts (Delaware and others) often defer to management’s decisions despite weak claims of shareholder benefit, and permit the consideration of other constituencies. This is true in part because shareholder welfare is a malleable concept, and there are almost no short term considered decisions a Board can make that can’t be justified in the long-term. And, of course, courts are institutionally ill-placed to second guess this kind of nuanced long-term calculus. To the extent that Dodge is the antipode of how courts ordinarily treat claims of waste, the Dodge rule either shouldn’t be taught to students or should be highlighted as, at best, a piece of exceptional dicta.

I am pretty sure I disagree with this critique of teaching Dodge. ...

The question now being batted around in the law reviews thus seems to me like the old CSR problem re-dressed in a debate about what the doctrine looks like. Should we teach Dodge? Certainly, because it provides one view of how courts think about directors’ duties. Not teaching Dodge would expose students to only one side of the contest going on every day in boardrooms and partners’ suites.

And Bainbridge thought that there was nothing new under the CSR-sun.

Um, Dave, if it’s “the old CSR problem re-dressed,” it ain’t new. Or perhaps you’re being ironic?

Anyway, debates over Dodge’s meaning and importance aren’t exactly new. In 1998, for example, Gordon Smith wrote a seminal article arguing the case was really about how tp “resolve disputes among majority and minority shareholders.” In 1999, Margaret Blair and Lynn Stout (85 Va. L. Rev. 247) likewise argued that Dodge is merely a close corporation shareholder dispute case. If Dave and I are thinking about the same articles, they’re mostly just recycling a lot of those arguments.