The Social Responsibility of Corporations--Posner‚Äôs Comment
I agree with almost everything that Becker says, but will suggest a few qualifications. I can think of one situation in which "pure" charitable donations by corporations, i.e., donations that do not increase profitability, could benefit shareholders. Assuming that most shareholders make some charitable donations, they might want the corporations they invest in to make modest charitable donations on the theory that a corporation will have more information about what are worthwhile charitable enterprises than an individual does. For example, charities differ greatly in the amount of money that they spend on their own administration, including salaries and perquisites for the employees of the charity, relative to the amount they give to the actual objects of charity. Presumably corporations are in a better position to determine which charities are efficient than individuals are; if so, then shareholders may impliedly consent to some amount of charitable giving by their corporations. But not much. The reason is that one person's charity is another person's deviltry: a shareholder who is opposed to abortion on religious grounds would be offended if his corporation contributed to Planned Parenthood. The practical significance of this point is that corporations avoid controversial charities, so that the issue of implied consent becomes whether the shareholder would like his corporation to make a modest contribution to some set of uncontroversial charities.
For the reason suggested above, the answer may be "yes"--and for the additional reason that there is a tax angle. If the shareholder receives a dividend, the corporation will have paid corporate income tax on the income from which the dividend is paid. Suppose the corporation and the shareholder are both in the 20 percent bracket. The corporation earns $10, pays $2 in tax, and gives the shareholder $8. The shareholder gives the $8 to charity, which costs him $6.40, since he gets a 20 percent tax deduction. If the shareholder wants the charity to have $10, it has to dig into his pockets for another $2, which costs him $1.60 (because of the 20 percent deduction), and so the total cost to him of giving the charity $10 is $8. Now suppose that, instead, the corporation gives the $10 to charity, a deductible expense, at a cost to it therefore of $8. Then the charity receives $10 rather than, as before, only $8. The shareholder loses his $2 deduction, which means that the total cost to him of the transfer is, as before, $8. But the corporation is better off to the tune of $2, since it avoids the corporate income tax on the $10 in income that it gave the charity. And anything that benefits the corporation benefits the shareholder.
Given product market as well as capital market competitive pressures, charitable spending that is not profit-maximizing because the cost exceeds the private benefits that Becker lists (public relations, advertising, government relations, and so forth) is unlikely to be significant. Even if corporate managers are not effectively constrained to profit maximization by their shareholders, expenditures that do not reduce the cost or increase the quality of the corporation's products will place it a competitive disadvantage with firms that do not make such expenditures.
A more difficult question has to do with a corporation's policy on obeying laws. From a strict shareholder standpoint, it might seem that corporate managers should obey the law only when the expected costs of violating it would exceed the expected benefits, so that managers would have a duty to their shareholders to disobey the law, perhaps especially in countries in which law enforcement is very weak, a country for example which had a law against child labor but was unable to enforce the law. This would be a case of a pure clash between ethical and profit-maximization duties. My view is that, given external (i.e., social as distinct from private) benefits of compliance with law, the ethical argument should prevail, so that a shareholder would be precluded from complaining that corporate management, by failing to violate the law even when it could get away with it, was violating its fiduciary duty to shareholders.
Another argument based on an externality, an argument that lies behind the law that forbids U.S. firms to engage in bribery abroad, even in countries where bribery is extremely common, is that reducing the amount of bribery in those countries will benefit U.S. firms in the long run by making the markets in these countries more open, to the advantage of efficient firms.
The fact that it will sometimes be in the shareholder interest for management to violate the law provides, moreover, a ground for punishing corporate managers sufficiently severely for corporate crimes that the punishment is not offset by shareholder gains for which the managers could be expected to be rewarded.