The Rhetoric of Corporate Law: The Impact of Stakeholder Rhetoric on Corporate Norms

Lisa M. Fairfax

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Corporate Social Responsibility Reporting Corporate Finance and Governance Corporate Governance and Law

Abstract

I. INTRODUCTION 676 II. THE BATTLE OF NORMS: THE EVOLUTION OF THE SHAREHOLDER PRIMACY AND STAKEHOLDER THEORIES 679 A. Stakeholder Theory Reconsidered 679 B. The Persistence of Shareholder Primacy Rhetoric 681 1. The Case for Shareholder Primacy's Dominance 682 2. The Rebuttal 683 3. The Reaffirmation 687 C. Concluding Assessments 690 III. THE EVIDENCE ON STAKEHOLDER RHETORIC 690 A. Corporate Documents and Websites 691 B. Codes of Conduct 694 C. Corporate Infrastructure 694 D. Business Schools and MBA Students 695 E. Corporate Organizations and Scholars 696 F. Reflections on Stakeholder Rhetoric 696 IV. THE IMPACT OF STAKEHOLDER RHETORIC ON CORPORATE NORMS 698 A. Towards a Definition of Corporate Rhetoric 699 B. The Meaning of the Message 702 C. The Relevance of Audience 705 1. Pinpointing the Audience and Purpose of Rhetoric 706 a. Judiciary and Federal Regulators 706 b. Customers 707 c. Employees-Current and Future 708 2. Rhetoric by Any Other Name 709 3. Rhetoric Aimed at Investors and the Business Community 710 D. Short-Term Life of Rhetoric 710 E. Concluding Thoughts on the Normative Impact of Stakeholder Rhetoric........ 711 V. CONCLUSION 711 APPENDIX A: DATA ON STAKEHOLDER RHETORIC IN FORTUNE 100 COMPANIES ........ 713 Table 1 713 Table 2 716 I. INTRODUCTION A long-running debate exists in corporate law between those who believe the corporation's sole or primary purpose is to maximize profit, the shareholder primacy theory, and those who believe a corporation must honor all of its constituents' interests, including the concerns of employees, creditors, customers, and society at large, the stakeholder theory.1 This debate has received prominent attention since 1932 when Professors Berle and Dodd debated the merits of these contrasting theoretical approaches in the Harvard Law Review. …

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