July 2014

Anne Tucker recently blogged about the relationship between corporate social performance and corporate financial performance.  She discussed the 2009 article “Does it Pay to Be Good?” in which the authors found a small positive effect on financial performance based upon a meta-analysis of 251 effects in 214 manuscripts.

In the course of my summer research, I came across a 2014 working paper entitled “Everybody’s Talking But is Anybody Listening? Stock Market Reactions to Corporate Social Responsibility Communications.” Professors Kun Yu, Shuili Du and C.B. Bhattacharya assert that theirs is the first to examine whether and how the stock market reacts to voluntary non-financial disclosure, namely stand-alone CSR reports. They conclude that non-financial CSR reports “play a critical role in supplementing firm financial disclosure and enhancing information transparency to investors and other important stakeholders.”

For those who aren’t familiar with CSR reports, they typically include information about firm performance in human resources, the environment, corporate governance, suppliers, customers, community engagement, and other relevant factors.  Examples of some good CSR reports are here. The study’s sample size consisted of Fortune 500 companies that released CSR reports between 2005-2011– 139 firms with 328 release dates during the relevant period.…

Opus

Below is the information that I received this morning regarding a one-year Visiting Distinguished Service Faculty in Business Law position at the Opus College of Business at the University of St. Thomas (MN). In April, I spoke at a social enterprise conference at the school and was quite impressed with the facilities, faculty members, and students.  

The Department of Ethics & Business Law in the Opus College of Business at the University of St. Thomas has an opening for a one-year position as a Visiting Distinguished Service Faculty in Business Law, for the 2014-15 academic year.  This position will involve teaching three courses (including International Business Law) each semester.  To apply (and for more information about this position), visit this site: https://facultyemployment-stthomas.icims.com/jobs/1252/visiting-distinguished-service-faculty-in-business-law/job, and submit an online application (two letters of recommendation to be sent separately).  Additional questions can be directed to the search committee chair, Dale Thompson (dbthompson@stthomas.edu).

Like my co-editor, Haskell Murray, I am participating in an on line symposium on Hobby Lobby over at the Conglomerate.  My piece focuses on the boundaries set (or left open) by the opinion and raises this new issue:

The Court framed the case as an “important question of religion and moral philosophy, namely, the circumstances under which it is immoral for a person to perform an act that is innocent in itself but hat has the effect of enabling or facilitating the commission of an import act by another.”  The corporate plaintiff didn’t have to violate its beliefs (that feels like an absurd statement), but taking an action that permitted a third party employee to possibly violate the beliefs of the corporation was a sufficient burden.  This is also ignores that the contraceptives at issue could be used for medical reasons unrelated to lifestyle choices.  Here is where I struggle the most with the reasoning of the Majority.  Employers pay employees subject to minimum wage laws. Employers have no guarantee that the employees will use the compensation in a manner consistent with the employer’s religious views.  Why is it different when the compensation comes in the form of employer-provided

…

Today I am highlighting a very interesting economics article exploring the relationship between corporate social performance and corporate financial performance.  

Scholars have been searching for a link between corporate social performance (CSP) and corporate financial performance (CFP) for thirty-five years. If only doing good could be connected to doing well, then companies might be persuaded to act more conscientiously, whether in cleaning up their own questionable conduct (Campbell, 2006) or in redressing societal ills (Porter & Kramer, 2006). A positive link between social and financial performance would legitimize corporate social performance on economic grounds, grounds that matter so much these days (Useem, 1996). It would license companies to pursue the good—even incurring additional costs—in order to enhance their bottom line and at the same time contribute more broadly to the well-being of society.

In DOES IT PAY TO BE GOOD?, three economists (Joshua Margolis,  HIllary Anger Elfenbein, and James P. Walsh) perform a meta analysis of 251 effects in over 200 manuscripts to examine the relationship between CSP and CFP.  They find a small positive effect. Most importantly, the articles engages in a rich conversation (and critique) of empirical studies in this area and suggests parameters for future research.  

This paper is accessible for non-economists…

The Hobby Lobby decision states:

No known understanding of the term “person” includes some but not all corporations. The term “person” sometimes encompasses artificial persons (as the Dictionary Act instructs), and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations. 20 Cf. Clark v. Martinez, 543 U. S. 371 , 378 (2005) (“To give th[e] same words a different meaning for each category would be to invent a statute rather than interpret one”).

The decision continues:

Under the Dictionary Act, “the wor[d] ‘person’ . . . include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” Ibid .; see FCC v. AT&T Inc., 562 U.S. ___, ___ (2011) (slip op., at 6) (“We have no doubt that ‘person,’ in a legal setting, often refers to artificial entities. The Dictionary Act makes that clear”). Thus, unless there is something about the RFRA context that “indicates otherwise,” the Dictionary Act provides a quick, clear, and affirmative answer to the question whether the companies involved in these cases may be heard. 

Thus, unless otherwise stated, any place a person can recover claims…

My post last week spawned more commentary than usual–on the BLPB site and off.  So, I am regrouping on the same issue for my post today and plan to push forward a bit on some of the areas of commentary.  Also, since The Conglomerate is running a Hobby Lobby symposium this week, I thought it might be nice to offer some thoughts on disclosure up here and (maybe) later chime in at The Conglomerate on this or other issues relating to the Hobby Lobby case later in the week . . . .

Reason.com has an interesting piece on the use of fallacious or unsupportable economic arguments by politicians.

My favorite economic fallacy, which the Reason article doesn’t discuss, is the use of multipliers to falsely exaggerate the effect of government spending. Universities tend to do this a lot: “Every taxpayer dollar spent at Enormous State University results in a $50 gain to the state economy.” To justify claims like this, you simply trace the dollars spent through multiple levels. If the university spends $100 to repair a window, that’s $100 of additional business for a local company. That company, in turn, uses the $100 to pay an employee. The employee uses the $100 to buy groceries at a local grocery store. The store then pays the $100 to a local farmer for her produce. The farmer then spends the $100 to buy supplies, etc. We’re already up to a $500 effect, and there’s no need to stop there. If you trace it through a sufficient number of transactions, the effect is enormous, even though it’s still only $100.

Using that same reasoning, it’s obvious that the key to economic recovery is to significantly increase my salary. Each dollar I receive…

Since I suspect there is something of an obligation for all corporate law bloggers to weigh in on Hobby Lobby, I offer my thoughts.  I admit to some trepidation posting them because (and I blush to confess it) I haven’t been as immersed in the case as most other corporate professors have, so I feel like a bit of an outsider to the debate.  So, take these thoughts as coming from someone whose knowledge of the case comes chiefly from, well, the Supreme Court’s opinion.

[More under the cut]