Saturday, July 26, 2008

What obligation? Maximise what? — Crooked Timber:

And, of course, the long term is a terribly difficult thing to forecast. It would, we can presume, be pretty bad for the S&P500 index if the Antarctic ice cap melted and we all drowned. Conversely, if the continent of Africa were to develop a billion consumers in a first world economy, that would be pretty good for the share prices of most companies on the stock exchange. There is a general long time interest of all humanity in doing good (that’s why it’s called “good”) and corporations and their shareholders do, in fact, share in this general interest of humanity. If you want to argue in any particular case that an act of corporate philanthropy isn’t connected tightly enough to a specific benefit which can be appropriated by the company and that this is wrong, then go for it but don’t expect the courts to agree with you.

Just as a footnote: in comments to John’s post, somebody raised the hypothetical case of whether a corporation would have a fiduciary duty to use slave labour if it was legal to do so. Actually, this isn’t a hypothetical case at all – in Nazi Germany it was legal for industrial companies to make use of slave labour (this is the plot of the film Schindler’s List). Some companies used it, some didn’t. The Nuremberg trials did not recognise the fiduciary duty to maximise profit as a defence.