Corporate Social Responsibility: A Legal Analysis (review)

The notion that businesses should respect human rights and consider the social and environmental effects of their actions has gained both broad acceptance and significance. Accordingly, the publication of Corporate Social Responsibility is very timely. For the authors of this comprehensive text, corporate social responsibility (CSR) reflects the necessary balance among the interests of a corporation's stakeholders, including not only shareholders, but also employees, creditors, business partners, neighbors, and others who are or may be affected by the corporation's actions. CSR is thus largely synonymous with such broad phrases as "corporate citizenship,"¹ "corporate responsibility,"² and "the triple-bottom-line."³ The field of CSR has increasingly emphasized that the "social" prong (as distinguished from the "environmental" prong of CSR) must be significantly informed, if not largely determined, by the human rights responsibilities of business.

The goal of the three authors—Michael Kerr, Richard Janda, and Chip Pitts (who also edited the volume)—is "not to proclaim that corporations are socially responsible," but rather "to show that the law now weighs in to give substance, meaning, and accountability to CSR undertakings."⁴ For the most part, the authors are successful in achieving this objective, and indeed, they demonstrate a tendency for national and international legal systems around the world, increasingly to require some form of corporate social conscience. In fact, nations as diverse as China and the United Kingdom have taken remarkable steps toward this end in recent years. Nonetheless, at times their reading of the situation may be somewhat optimistic, in the sense that much work by governments and corporations themselves remains to be done to ensure that corporations actually behave in a socially responsible fashion. While the book is more descriptive than normative, any analysis of current law may not give sufficient emphasis to the need for further effort to achieve CSR more effectively.

The book is organized around seven principles that constitute CSR: integrated, sustainable decision-making; stakeholder engagement; transparency; consistent best practices; the precautionary principle; accountability; and community investment. National and international law has increasingly incorporated these principles, making a significant impact on the growth of CSR. In tracing these developments and organizing them into a conceptual structure of seven principles, the authors have made a useful contribution to the field of CSR by highlighting CSR as an important legal domain for the twenty-first century.

The authors place each of the seven principles within a historical timeline that both counters arguments that corporations are required by law to be "pathologically" devoted to profit,⁵ and indicates that any tendency towards requiring corporations to be constituted solely for the profit of shareholders is an historical anomaly. Corporations have always been required to consider other stakeholders, and, indeed, the creation of the corporation as a legal entity was premised upon the interests of broader range of stakeholders.⁶ In addition, the book persuasively argues that the debate surrounding the establishment of voluntary or mandatory requirements for CSR is wrongheaded and misleading. Rather corporations should be encouraged to act responsibly within the "shadow of the law,"⁷ and corporations and governments should work together to establish regulations that are mutually acceptable.

The first principle—integrated, sustainable decision-making—is the keystone to CSR and to all seven principles. "Integrated" decision-making focuses on what interests the board of directors of a corporation is required, or permitted, to consider when making decisions. For example, the authors ask whether a board can, or should, consider the harm to employees that closing a plant would entail. Or, in the alternative, is a board required to consider only the interest of the shareholders?⁸ The authors argue that the shareholder primacy view of the corporation as a "pathological" entity designed to maximize shareholder wealth is an historical anomaly and that the case for its existence is overstated in regard to most countries' laws. The authors are persuasive on this point by illustrating both established law, as well as an...